Acquisitions

The Company’s acquisitions have been accounted for as business combinations. Net assets and results of operations are included in the Company’s consolidated financial statements commencing at the respective purchase closing dates. In connection with acquisitions, the Company records the estimated value of the net tangible assets purchased and the value of the identifiable intangible assets purchased, which typically consist of purchased customer lists, trademarks and non-compete agreements. The valuation of purchased intangible assets involves significant estimates and assumptions. Any change in assumptions could affect the carrying value of such intangible assets.

The Risk and Insurance segment completed fifteen acquisitions during 2014.

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January - Marsh & McLennan Agency ("MMA") acquired Barney & Barney, LLC, 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, 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.


•	February - 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.


•	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.


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


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


•	September - Marsh acquired Kocisko Insurance Brokers, Inc., a full-service commercial insurance brokerage located in Montreal, Quebec.


•	October - MMA acquired NuWest Insurance Services, Inc., a California-based property-casualty agency.


•	November - Marsh acquired Torrent Technologies, Inc., a Montana-based flood insurance specialist.


•	December - Marsh acquired Seafire Insurance Services, LLC, a Kansas-based managing general underwriter, and Trade Insure NV, a leading distributor of credit insurance policies in Belgium, and MMA acquired The Benefit Planning Group, Inc., a North Carolina-based employee benefit consulting firm.

The Consulting segment completed six acquisitions during 2014.


•	February - Mercer acquired Transition Assist, a retiree exchange specializing in helping retirees in employer-sponsored plans select Medicare supplemental health care insurance.


•	September - Oliver Wyman acquired Bonfire Communications, an agency specializing in employee engagement and internal communications based in San Francisco, California.


•	November - Mercer acquired AUSREM, a remuneration research and workforce consulting specialist based in Australia, and Jeitosa Group International, a global HR business consultancy and IT systems integration firm.


•	December - Mercer acquired Denarius, a compensation and benefits survey and information products consulting firm based in Chile, and Oliver Wyman acquired OC&C Strategy Consultants (Boston) LLC (part of the OC&C network), a Boston-based consulting firm specializing in the business media, information services and education sectors.

Total purchase consideration for acquisitions made during 2014 was $772 million, which consisted of cash paid of $575 million and deferred purchase and estimated contingent consideration of $197 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. During 2014, the Company also paid $25 million of deferred purchase consideration and $42 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, based on their fair values:



(In millions)	2014
Cash	$	575
Estimated fair value of deferred/contingent consideration	197
Total consideration	$	772
Allocation of purchase price:
Cash and cash equivalents	$	21
Accounts receivable, net	12
Other current assets	1
Property, plant, and equipment	5
Intangible assets (primarily customer lists amortized over 10 years)	318
Goodwill	472
Other assets	7
Total assets acquired	836
Current liabilities	41
Other liabilities	23
Total liabilities assumed	64
Net assets acquired	$	772

Prior Year Acquisitions

During 2013, the Risk and Insurance segment completed the following six acquisitions:


•	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.

During 2013, the Consulting segment completed the following two acquisitions:


•	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 2013 was $178 million, which consisted of cash paid of $139 million and deferred purchase and estimated contingent consideration of $39 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. During 2013, the Company also paid $15 million of deferred purchase consideration and $17 million of contingent consideration related to acquisitions made in prior years. In addition, the Company paid $2 million to purchase other intangible assets during 2013.

Pro-Forma Information

While the Company does not believe its acquisitions in the aggregate are material, the following unaudited pro-forma financial data gives effect to the acquisitions made by the Company during 2014 and 2013. 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, 2013 and reflects acquisitions made in 2013 as if they occurred on January 1, 2012. 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.



	Years Ended December 31,
(In millions, except per share data)	2014		2013		2012
Revenue	$	13,039	$	12,550	$	12,202
Income from continuing operations	$	1,477	$	1,395	$	1,222
Net income attributable to the Company	$	1,471	$	1,373	$	1,195
Basic net income per share:
– Continuing operations	$	2.65	$	2.49	$	2.20
– Net income attributable to the Company	$	2.70	$	2.50	$	2.20
Diluted net income per share:
– Continuing operations	$	2.62	$	2.45	$	2.16
– Net income attributable to the Company	$	2.66	$	2.46	$	2.16

The consolidated statements of income for 2014 include approximately $134 million of revenue and $18 million of operating income related to acquisitions made during 2014.

Alexander Forbes: In June 2014, Mercer entered into a definitive agreement to acquire a 34% interest in South Africa-based Alexander Forbes Group Holding 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. In July 2014, the Company purchased 14.9% of Alexander Forbes common shares for approximately $137 million. In October 2014, the Company paid approximately $166 million for the remaining 19.1% of Alexander Forbes common shares.

The Company’s investment in Alexander Forbes is accounted for using the equity method of accounting and is included in other assets in the consolidated balance sheet. The Company records this investment and its share of Alexander Forbes’ net income or loss on a one quarter lag basis.

Upon completion of the acquisition, the purchase price of the Alexander Forbes shares exceeded the Company's share of the equity in net assets by approximately $146 million. The majority of this basis difference resulted from the excess of the Company’s purchase price for the Alexander Forbes common stock acquired over the book value of Alexander Forbes’ net assets. Substantially all of this basis difference was allocated, based on our preliminary estimates of the fair values of Alexander Forbes’ assets and liabilities, to the value of investment contracts, customer contracts and relationships acquired and technology related intangible assets, related deferred tax liability and goodwill. The basis difference related to these intangible assets (excluding goodwill) is recorded as additional amortization expense over their estimated lives. The basis difference related to the goodwill will be recognized upon disposition of our investment. The Company is finalizing its purchase price allocation.

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.