Acquisitions

During the first nine months of 2011 the Company made four acquisitions in its Risk and Insurance Services segment and three in its Consulting segment. In January 2011, Marsh acquired RJF Agencies, Inc., an independent insurance broking firm in the Midwest. In February 2011, Marsh acquired Hampton Roads Bonding, a surety bonding agency for commercial, road, utility, maritime and government contractors in the state of Virginia, and the Boston office of Kinloch Consulting Group, Inc. In July 2011, Marsh acquired Prescott Pailet Benefits, an employee benefits broker in the state of Texas. These acquisitions were made to expand Marsh’s share in the middle-market through Marsh & McLennan Agency.

In January 2011, Mercer acquired Hammond Associates, an investment consulting company for endowments and foundations in the U.S. In June 2011, Mercer acquired Evaluation Associates LLC, an investment consulting firm. In July 2011, Mercer acquired Mahoney Associates, a health and benefits advisory firm based in south Florida.

Total purchase consideration for the 2011 acquisitions was $132 million which consisted of cash paid of $116 million and estimated contingent consideration of $16 million. Contingent consideration arrangements are primarily based on EBITDA and revenue targets over two to four years. The fair value of the contingent consideration was based on projected revenue and earnings of the acquired entities. Estimated fair values of assets acquired and liabilities assumed are subject to adjustment when purchase accounting is finalized. The Company also paid $19 million of deferred purchase and contingent consideration related to acquisitions made in prior years. In addition, the Company paid $2 million to purchase other intangible assets during the first nine months of 2011.

In the second quarter of 2011, Marsh acquired the remaining minority interest of a previously majority owned entity for total purchase consideration of $8 million and accounted for this acquisition under the accounting guidance for consolidations and non-controlling interests. This guidance requires that changes in a parent’s ownership interest while retaining financial controlling interest in a subsidiary be accounted for as an equity transaction. Stepping up the acquired assets to fair value or the recording of goodwill is not permitted. Therefore, the Company recorded a decrease to additional paid-in capital in 2011 of $2 million related to this transaction.

In the first quarter of 2011, the Company paid deferred purchase consideration of $13 million related to the purchase in 2009 of the minority interest of a previously controlled entity.

The following table presents the preliminary allocation of the acquisition cost to the assets acquired and liabilities assumed, based on their fair values (amounts in millions):



Cash	$	116
Contingent consideration	16
Total Consideration	$	132
Allocation of purchase price:
Cash and cash equivalents	$	3
Accounts receivable, net	6
Property, plant, and equipment	2
Intangible assets	54
Goodwill	86
Total assets acquired	151
Current liabilities	12
Other liabilities	7
Total liabilities assumed	19
Net assets acquired	$	132

Prior Year Acquisitions

During the first nine months of 2010, the Company made four acquisitions in its Risk and Insurance Services segment and two acquisitions in its Consulting segment.

In July 2010, Mercer acquired IPA, a provider of health and benefit record-keeping and employee enrollment technology. In August 2010, Mercer acquired ORC Worldwide, a premier provider of HR knowledge, data and solutions for professionals in numerous industries.

During the first three quarters of 2010, the Company made four acquisitions in its Risk and Insurance Services segment. In February 2010, Marsh acquired Haake Companies, Inc., an independent insurance broking firm in the Midwest. In March 2010, Marsh acquired Thomas Rutherfoord, Inc., an insurance broking firm in the Southeast and mid-Atlantic regions in the U.S. On April 30, 2010, Marsh acquired the Bostonian Group, one of the largest regional insurance borkerages in New England. These acquisitions were made to expand Marsh’s share in the middle-market through Marsh & McLennan Agency. On April 1, 2010, Marsh completed the acquisition of HSBC Insurance Brokers Ltd. This transaction deepens Marsh’s presence in the U.K., Hong Kong, Singapore, China and the Middle East. As part of the acquisition agreement, Marsh also entered into a strategic partnership with HSBC Bank that gives the Company preferred access to provide insurance broking and risk management services to HSBC and their corporate and private clients.

Total purchase consideration for the six acquisitions made during the first nine months of 2010 was $530 million which consisted of cash paid of $282 million, the issuance of 7.6 million shares with a fair value of $183 million, and estimated contingent consideration of $65 million. Contingent consideration arrangements are primarily based on EBITDA and revenue targets over two to four years. The fair value of the contingent consideration was based on earnings projections of the acquired entities. Estimated fair values of assets acquired and liabilities assumed are subject to adjustment when purchase accounting is finalized.

In 2010, the Company also paid $21 million of deferred purchase consideration and $2 million of contingent purchase consideration related to acquisitions made in prior years and $3 million to purchase other intangible assets.

In the first quarter of 2010, the Company paid deferred purchase consideration of $15 million related to the purchase in 2009 of the minority interest of a previously controlled entity.

Pro-Forma Information

While the Company does not believe its acquisitions are material in the aggregate, the following unaudited pro-forma financial data gives effect to the acquisitions made by the Company during 2011 and 2010. In accordance with accounting guidance related to pro-forma disclosures, the information presented for current year acquisitions is as if they occurred on January 1, 2010. The pro-forma information adjusts for the effects of amortization of acquired intangibles. The unaudited pro-forma financial data is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been achieved if such acquisitions had occurred on the dates indicated, nor is it necessarily indicative of future consolidated results.



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions, except per share data)	2011		2010		2011		2010
Revenue	$	2,806	$	2,568	$	8,630	$	7,985
Income from continuing operations	$	133	$	131	$	741	$	383
Net income attributable to the Company	$	131	$	171	$	739	$	661
Basic net income per share:
– Continuing operations	$	0.24	$	0.23	$	1.32	$	0.67
– Net income attributable to the Company	$	0.24	$	0.31	$	1.35	$	1.20
Diluted net income per share:
– Continuing operations	$	0.23	$	0.23	$	1.30	$	0.67
– Net income attributable to the Company	$	0.24	$	0.31	$	1.33	$	1.19

The Consolidated Statements of Income for the three and nine months ended September 30, 2011 include approximately $21 million of revenue and $2 million of net operating income and approximately $55 million of revenue and $8 million of net operating income, respectively, related to acquisitions made during 2011.