Acquisitions

The Company completed nine acquisitions during the first six months of 2014.

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January - Marsh & McLennan Agency ("MMA") acquired Barney & Barney, a San Diego-based insurance broking firm that provides insurance, risk management, and employee benefits solutions to businesses and individuals throughout the U.S. and abroad. Also in January, Marsh acquired Central Insurance Services, an independent insurance broker in Scotland that provides insurance broking and risk advisory services to companies of all sizes across industry sectors.


•	February - MMA acquired Great Lakes Employee Benefits Services, Inc., an employee group benefits consulting and brokerage firm based in Michigan, and Bond Network, Inc., a surety bonding agency based in North Carolina.


•	March - MMA acquired Capstone Insurance Services, LLC, an agency that provides property/casualty insurance and risk management solutions to businesses and individuals throughout South Carolina, and Mercer acquired Transition Assist, a retiree exchange specializing in helping retirees in employer-sponsored plans select Medicare supplemental health care insurance.


•	May - MMA acquired Kinker-Eveleigh Insurance Agency, an Ohio-based agency specializing in property-casualty and employee benefits solutions, and VISICOR, a full-service employee benefits brokerage and consulting firm based in Texas.


•	June - MMA acquired Senn Dunn Insurance, an insurance agency located in North Carolina.

The MMA acquisitions were made to expand Marsh's presence in the U.S. middle-market business.

Total purchase consideration for acquisitions made during the first six months of 2014 was $534 million, which consisted of cash paid of $394 million and deferred purchase and estimated contingent consideration of $140 million. Contingent consideration arrangements are primarily based on EBITDA and revenue targets over periods ranging from two to four years. The fair value of the contingent consideration was based on projected revenue and earnings of the acquired entities. The estimated fair values of assets acquired and liabilities assumed are subject to adjustment when purchase accounting is finalized. The Company also paid $9 million of deferred purchase consideration and $36 million of contingent consideration related to acquisitions made in prior years.

The following table presents the preliminary allocation of the acquisition cost to the assets acquired and liabilities assumed during 2014 based on their fair values:



For the Six Months Ended June 30, 2014
(Amounts in millions)
Cash	$	394
Estimated fair value of deferred/contingent consideration	140
Total Consideration	$	534
Allocation of purchase price:
Cash and cash equivalents	$	20
Accounts receivable, net	5
Other current assets	—
Property, plant, and equipment	3
Intangible assets	210
Goodwill	334
Other assets	2
Total assets acquired	574
Current liabilities	35
Other liabilities	5
Total liabilities assumed	40
Net assets acquired	$	534

Prior Year Acquisitions

The Risk and Insurance Services segment completed six acquisitions during 2013.


•	June - Marsh acquired Rehder y Asociados Group, an insurance adviser in Peru. The business includes the insurance broker Rehder y Asociados and employee health and benefits specialist, Humanasalud. Marsh also completed the acquisition of Franco & Acra Tecniseguros, an insurance advisor in the Dominican Republic.


•	July - Guy Carpenter acquired Smith Group, a specialist disability reinsurance risk manager and consultant based in Maine.


•	September - Marsh purchased an additional stake in Insia a.s., an insurance broker operating in the Czech Republic and Slovakia which, when combined with its prior holdings, gave MMC a controlling interest. Insia a.s. was previously accounted for under the equity method.


•	November - Marsh & McLennan Agency ("MMA") acquired Elsey & Associates, a Texas-based provider of surety bonds and insurance coverage to the construction industry.


•	December - MMA acquired Cambridge Property and Casualty, a Michigan-based company providing insurance and risk management services to high net worth individuals and mid-sized businesses.

The MMA acquisitions were made to expand Marsh's presence in the U.S. middle-market business.

The Consulting segment completed two acquisitions during 2013.


•	July - Oliver Wyman acquired Corven, a U.K.-based management consultancy firm.


•	August - Mercer acquired Global Remuneration Solutions, a market leading compensation consulting firm based in South Africa.

Total purchase consideration for acquisitions made during the six months of 2013 was $109 million, which consisted of cash paid of $95 million and deferred purchase and estimated contingent consideration of $14 million. Contingent consideration arrangements are primarily based on EBITDA and revenue targets over periods ranging from two to four years. The fair value of the contingent consideration was based on projected revenue and earnings of the acquired entities. The estimated fair values of assets acquired and liabilities assumed are subject to adjustment when purchase accounting is finalized. The Company also paid $3 million of deferred purchase consideration and $5 million of contingent consideration related to acquisitions made in prior years.

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 the first six months of 2014 and 2013. In accordance with accounting guidance related to pro-forma disclosure, the information presented for the 2014 acquisitions is as if they occurred on January 1, 2013 and reflects acquisitions made in 2013 as if they occurred on January 1, 2012. The unaudited 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 June 30,				Six Months Ended June 30,
(In millions, except per share figures)	2014		2013		2014		2013
Revenue	$	3,306	$	3,152	$	6,591	$	6,348
Income from continuing operations	$	440	$	406	$	900	$	823
Net income attributable to the Company	$	431	$	393	$	877	$	812
Basic net income per share:
– Continuing operations	$	0.79	$	0.72	$	1.60	$	1.46
– Net income attributable to the Company	$	0.79	$	0.71	$	1.60	$	1.48
Diluted net income per share:
– Continuing operations	$	0.78	$	0.71	$	1.58	$	1.44
– Net income attributable to the Company	$	0.78	$	0.70	$	1.58	$	1.45

The consolidated statements of income include the results of operations of acquired companies since their respective acquisition dates. The consolidated statement of income for the three- and six-month periods ending June 30, 2014 includes approximately $38 million of revenue and $5 million of net operating income and approximately $59 million of revenue and $6 million of net operating income, respectively, related to acquisitions made in 2014.

Subsequent Acquisition

On June 23, 2014, Mercer announced that it had entered into a definitive agreement to acquire a 34% stake in South Africa-based Alexander Forbes Group Holdings Limited ("Alexander Forbes") for approximately $312 million, becoming a strategic shareholder after Alexander Forbes successfully launched an initial public offering. Mercer will purchase its stake in Alexander Forbes in two tranches at 7.50 South African Rand per share. On July 24, 2014, the Company purchased 14.9% of Alexander Forbes common shares for approximately $140 million. The remaining 19.1% of the common shares will be purchase by early October 2014, subject to the receipt of requisite regulatory approvals. Alexander Forbes is listed on the Johannesburg Stock Exchange. In July, the Company entered into a forward contract that expires on September 30, 2014 to sell British Pounds and purchase South African Rand to lock in current foreign exchange rates for the remaining commitment. Gain or loss on the forward contract will flow through earnings in the third quarter of 2014. The investment in Alexander Forbes will be accounted for using the equity method.

Alexander Forbes principally focuses on employee benefits and investment solutions for institutional clients, and financial wellbeing and retail financial solutions for individual clients. Services include retirement funds and investment consulting, actuarial and administration services, employee risk benefits and health-care consulting, multi-manager investments solutions, and personal lines and business insurance. The range of services provided by Alexander Forbes aligns closely with Mercer's global business.