Acquisitions

The Company completed 12 acquisitions during the first nine 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, a full service insurance brokerage located in North Carolina.


•	July - Marsh acquired Seguros Morrice y Urrutia S.A., an insurance broker based in Panama City, Panama.


•	September - Marsh acquired Kocisko Insurance Brokers, Inc., an insurance agency located in Montreal, Quebec; and Oliver Wyman acquired Bonfire Communications, an agency specializing in employee engagement and internal communications based in San Francisco, California.

Total purchase consideration for acquisitions made during the first nine months of 2014 was $573 million, which consisted of cash paid of $426 million and deferred purchase and estimated contingent consideration of $147 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 $10 million of deferred purchase consideration and $40 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 Nine Months Ended September 30, 2014
(Amounts in millions)
Cash	$	426
Estimated fair value of deferred/contingent consideration	147
Total Consideration	$	573
Allocation of purchase price:
Cash and cash equivalents	$	20
Accounts receivable, net	6
Other current assets	—
Property, plant, and equipment	4
Intangible assets	233
Goodwill	350
Other assets	5
Total assets acquired	618
Current liabilities	36
Other liabilities	9
Total liabilities assumed	45
Net assets acquired	$	573

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 Marsh a controlling interest. Insia a.s. was previously accounted for under the equity method.


•	November - 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 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 first nine months of 2013 was $156 million, which consisted of cash paid of $119 million and deferred purchase and estimated contingent consideration of $37 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 $4 million of deferred purchase consideration and $8 million of contingent consideration related to acquisitions made in prior years.

Pro-Forma Information

While the Company does not believe its acquisitions made during the first nine months of 2014 and 2013 are material in the aggregate, the following unaudited pro-forma financial data gives effect to the acquisitions made by the Company. 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 September 30,				Nine Months Ended September 30,
(In millions, except per share figures)	2014		2013		2014		2013
Revenue	$	3,143	$	2,981	$	9,744	$	9,338
Income from continuing operations	$	305	$	263	$	1,205	$	1,085
Net income attributable to the Company	$	298	$	256	$	1,174	$	1,067
Basic net income per share:
– Continuing operations	$	0.55	$	0.47	$	2.15	$	1.93
– Net income attributable to the Company	$	0.55	$	0.47	$	2.15	$	1.94
Diluted net income per share:
– Continuing operations	$	0.54	$	0.46	$	2.13	$	1.90
– Net income attributable to the Company	$	0.54	$	0.46	$	2.12	$	1.91

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 nine-month periods ending September 30, 2014 includes approximately $46 million of revenue and $5 million of net operating income and approximately $104 million of revenue and $11 million of net operating income, respectively, related to acquisitions made in 2014.

Equity Investment

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"), becoming a strategic shareholder after Alexander Forbes successfully launched an initial public offering. Mercer purchased 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 $137 million, which is included in other assets in the consolidated balance sheets. The investment in Alexander Forbes is accounted for using the equity method and included in other assets in the consolidated balance sheet. In October 2014, the Company paid approximately $166 million for the remaining 19.1% of Alexander Forbes common shares.

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.