Acquisitions and Dispositions

6 Months Ended

Jun. 30, 2011

Acquisitions and Dispositions

Acquisitions and Dispositions

5.  Acquisitions and Dispositions

Acquisitions

In the first six months of 2011, the Company completed the acquisition of two companies in the Risk Solutions segment, including Glenrand MIB Limited (“Glenrand”).  In the first six months of 2010, the Company completed the acquisition of the JP Morgan Compensation and Benefit Strategies Division of JP Morgan Retirement Plan Services, LLC, which is included in the HR Solutions segment, as well as 13 other companies, which are included in the Risk Solutions segment.

The following table includes the aggregate consideration transferred and the preliminary value of intangible assets recorded as a result of the Company’s acquisitions.

	Six months ended June 30,
(millions)	2011		2010
Consideration	$	92	$	104
Intangible assets:
Goodwill	$	59	$	41
Other intangible assets	28		38
	$	87	$	79

The results of operations of these acquisitions are included in the Condensed Consolidated Financial Statements from the dates they were acquired.  The results of operations would not have been materially different if these acquisitions had been reported from the beginning of the period.

Hewitt Associates, Inc.

On October 1, 2010, the Company completed its acquisition of Hewitt Associates, Inc. (“Hewitt”), one of the world’s leading human resource consulting and outsourcing companies.  Aon purchased all of the outstanding shares of Hewitt common stock in a cash-and-stock transaction valued at approximately $4.9 billion, of which the total amount of cash paid and the total number of shares of stock issued by Aon each represented approximately 50% of the aggregate consideration.

The Company incurred certain acquisition and integration costs associated with the transaction that were expensed as incurred.  In the three months and six months ended June 30, 2011, the Company’s HR Solutions segment incurred $5 million and $20 million, respectively, of these Hewitt related costs which are recorded in Other general expenses in the Condensed Consolidated Statements of Income.

The transaction has been accounted for using the acquisition method of accounting which requires, among other things, that most assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The following table summarizes the preliminary amounts recognized for assets acquired and liabilities assumed as of the acquisition date. Certain estimated values are not yet finalized (see below) and are subject to change, which could be significant. The Company will finalize the amounts recognized as information necessary to complete the analyses is obtained. The Company expects to finalize these amounts as soon as possible but no later than one year from the acquisition date.

The following table summarizes the preliminary values of assets acquired and liabilities assumed as of the acquisition date (in millions):

	Amounts
	recorded as of
	the acquisition
	date
Working capital (1)	$	391
Property, equipment, and capitalized software	319
Identifiable intangible assets:
Customer relationships	1,800
Trademarks	890
Technology	215
Other noncurrent assets (2)	344
Long-term debt	346
Other noncurrent liabilities (3)	361
Net deferred tax liability (4)	1,035
Net assets acquired	2,217
Goodwill	2,715
Total consideration transferred	$	4,932

(1)  Includes cash and cash equivalents, short-term investments, client receivables, other current assets, accounts payable and other current liabilities.

(2) Includes primarily deferred contract costs and long-term investments.

(3) Includes primarily unfavorable lease obligations and deferred contract revenues.

(4) Included in Other current assets ($31 million), Deferred tax assets ($62 million), Other current liabilities ($32 million) and Deferred tax liabilities ($1.1 billion) in the Company’s Consolidated Statements of Financial Position.

The acquired customer relationships are being amortized over a weighted average life of 12 years.  The technology asset is being amortized over 7 years and trademarks have been determined to have indefinite useful lives.

The recorded amounts are preliminary and subject to change. The following items are still subject to change:

· Amounts for property, equipment and capitalized software assets, pending finalization of valuation efforts.

· Amounts for income tax assets, receivables and liabilities pending the filing of Hewitt pre-acquisition tax returns and the receipt of information from taxing authorities which may change certain estimates and assumptions used.

· Amounts for deferred tax assets and liabilities pending the finalization of the valuations of assets acquired, liabilities assumed and resulting goodwill.

A single estimate of fair value results from a complex series of the Company’s judgments about future events and uncertainties and relies heavily on estimates and assumptions. The Company’s judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results of operations.

Dispositions — Continuing Operations

In the first six months of 2011, the Company completed the sale of one Company in the Risk Solutions segment.  A pretax loss of $1.8 million was recognized on this sale, which is included in Other income (expense) in the Condensed Consolidated Statements of Income.

Dispositions — Discontinued Operations

Income from discontinued operations before income taxes, as presented in the Condensed Consolidated Statements of Income, was $1 million and $5 million, for the three and six months ended June 30, 2011, which represents proceeds from the sale of businesses in prior periods.  For the three and six months ended 2010, the Company incurred a loss from discontinued operations of $41 million and $39 million, respectively, related primarily to the settlement of legacy litigation.