Marsh CEO expects faster growth through JLT acquisition

Broker Marsh & McLennan Companies (MMC) CEO Daniel Glaser expects that the group will accelerate the pace of growth through the Jardine Lloyd Thompson Group (JLT) acquisition.

MMC is acquiring re/insurance broker JLT for a total estimated enterprise value of $6.4 billion.

While MMC’s organic revenue growth expectation was 3-5 percent this is now set to move upwards as the company reaps the benefits of the acquisition of JLT which operates at a faster growth pace and adds new regions and lines of business to the group.

“It absolutely accelerates our aspirations,” Glaser said during a Sept. 18 investor call.

“JLT skews into higher growth areas, it should provide a lift over time,” he added. While suggesting that organic growth could potentially cross the 5 percent level but not committing to any particular target, Glaser noted that “JLT consistently has outgrown its competitors organically and we would expect that to continue as a combined business”.

“We feel comfortable that this is more about growth than any other factor and about positioning both by geography, by specialisation, and segmentation,” Glaser explained.

JLT operates in reinsurance, specialty and employee benefits. In the first six months of 2018 the broker recorded organic revenue growth of 4 percent. Specialty contributed with 4 percent organic growth during the period, reinsurance 6 percent and employee benefits with 4 percent.

“JLT is a company that punches above its weight,” Glaser said. “On any given day they could have beaten any broker on an account. They are highly skilled, highly motivated, highly specialised. When I look at it it’s a tremendous injection of power,” he added.

Specialty areas where JLT excels include aerospace, energy, construction and real estate, Glaser suggested. Following the expected closing of the transaction in spring 2019, Glaser wants to find combined approaches to the market.

The acquisition of JLT also adds reinsurance broker capabilities to MMC’s existing Guy Carpenter reinsurance operations.

“There are very few transactions that we’ve done that hit on every point of our philosophy,” Glaser noted.

The group also expects to benefit from synergies as the two companies are combined.

“We are in the same businesses in certain areas. There are going to be duplications and overlaps,” Glaser said.

As both JLT and MMC are publicly listed, Glaser expects that costs related to the listing can be reduced. Other areas where the combination of the firms can offer cost reductions include real estate, technology and infrastructure, he noted. Furthermore, as both firms use vendors and outside services, these can also be combined, Glaser suggested.

In addition, functional areas and back office areas present some overlap in finance, legal, human resources (HR), compliance, service centres and call centres, which may be combined, Glaser explained.

In order to reduce staff, the group may not replace employees that are leaving the company.

Glaser noted that MMC was watching JLT for some time, waiting for an opportunity to take it over.

“I would have preferred to acquire them a couple of years ago since their stock has such a run-up as they realise some of the benefits of their strategy,” Glaser said.

But MMC wanted to transact through a friendly takeover.

“It really needed that both sides thought that the timing was right,” Glaser said.

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