Acquisitions and Dispositions

3 Months Ended

Mar. 31, 2022

Business Combination and Asset Acquisition [Abstract]

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 values of the net tangible assets and the identifiable intangible assets purchased, which typically consist of customer relationships, developed technology, trademarks and non-compete agreements. The valuation of purchased intangible assets involves significant estimates and assumptions. The Company estimates the fair value of purchased intangible assets, primarily using the income approach, by determining the present value of future cash flows over the remaining economic life of the respective assets. The significant estimates and assumptions used in this approach include the determination of the discount rate, economic life, future revenue growth rates, expected account attrition rates and earnings margins. Refinement and completion of final valuation of net assets acquired could affect the carrying value of tangible assets, goodwill and identifiable intangible assets.

The Risk and Insurance Services segment completed one acquisition during the three months ended March 31, 2022:

•January – Marsh McLennan Agency ("MMA") acquired Heil & Kay Insurance Agency Inc., an Illinois-based full-service independent insurance agency providing business insurance, employee health benefits services and personal lines insurance.

The Consulting segment completed two acquisitions during the three months ended March 31, 2022:

•February – Oliver Wyman acquired Azure Consulting, an Australia-based management consulting firm with expertise in strategy development, organizational design and operations in the industrials, energy and natural resources sectors.

•March – Mercer acquired GeFi Assurances, a France-based brokerage and consulting firm specializing in collective corporate social protection.

Total purchase consideration for acquisitions made during the three months ended March 31, 2022 was $28 million, which consisted of cash paid of $24 million and deferred purchase consideration and estimated contingent consideration of $4 million. Contingent consideration arrangements are based primarily on earnings before interest, tax, depreciation and amortization ("EBITDA") or revenue targets over a period of two to four years. During the three months ended March 31, 2022, the Company also paid $12 million of deferred purchase consideration and $4 million of contingent consideration related to acquisitions made in prior years. Estimated fair values of assets acquired and liabilities assumed are subject to adjustment until purchase accounting is finalized.

The following table presents the preliminary allocation of purchase consideration to the assets acquired and liabilities assumed during 2022 based on the estimated fair values for the acquisitions as of their respective acquisition dates:


Acquisitions through March 31, 2022
(In millions)
Cash	$	24
Estimated fair value of deferred/contingent consideration	4

Total consideration	$	28
Allocation of purchase price:


Net receivables	1
Other current assets	2
Goodwill	17
Other intangible assets	10





Total assets acquired	30
Current liabilities	1






Other liabilities	1
Total liabilities assumed	2

Net assets acquired	$	28

The purchase price allocation for assets acquired and liabilities assumed is based on estimates that are preliminary in nature and subject to adjustments, which could be material. Any necessary adjustments must be finalized during the measurement period, which for a particular asset, liability, or non-controlling interest ends once the acquirer determines that either (1) the necessary information has been obtained or (2) the information is not available. However, the measurement period for all items is limited to one year from the acquisition date.

Items subject to change include:

•amounts of intangible assets, fixed assets, capitalized software assets and right-of-use assets, subject to finalization of valuation efforts;

•amounts for contingencies, pending the finalization of the Company’s assessment of the portfolio of contingencies;

•amounts for deferred tax assets and liabilities, pending the finalization of valuations of the assets acquired, liabilities assumed and associated goodwill discussed below; and

•amounts for income tax assets, receivables and liabilities, pending the filing of the acquired companies' pre-acquisition income tax returns and receipt of information from taxing authorities which may change certain estimates and assumptions used.

The estimation of fair value requires numerous judgments, assumptions and estimates about future events and uncertainties, which could materially impact these values, and the related amortization, where applicable, in the Company’s results of operations.

The following table provides information about intangible assets acquired during 2022:

Intangible assets through March 31, 2022

(In millions)

Amount

Weighted Average Amortization Period

Client relationships

10.4 years

The consolidated statements of income include the results of operations of acquired companies since their respective acquisition dates. The Company had no acquisitions during the first three months of 2021.

Dispositions

During the first three months of 2022, Mercer sold its retirement plan administration and call center operations in Brazil for cash proceeds of approximately $4 million.

Prior-Year Acquisitions

The Risk and Insurance Services segment completed eight acquisitions during 2021:

•April – MMA acquired PayneWest Insurance, Inc., a Montana-based full-service broker providing business insurance, surety, employee benefits and personal insurance services to companies and individuals, and The Pryor Group, LLC, a Texas-based full-service broker providing business insurance with a specialty in quick service restaurants and the personal lines of franchise owners.

•September – MMA acquired Vaaler Insurance, Inc., a North Dakota-based insurance broker providing business insurance, employee health and benefits, and personal lines solutions, with specialized expertise in the construction, education, and healthcare industries.

•November – MMA acquired Pelnik Insurance, a North Carolina-based full-service broker providing business insurance, employee health and benefits, and private client services to midsize businesses and individuals throughout the Mid-Atlantic, Southwest Truck Insurance Agency, Inc., a Texas-based broker providing business insurance for the trucking industry, serving clients in the U.S., and Mexico and InSource Insurance Group LLC, a Texas-based full-service broker providing business insurance, employee health and benefits, private client and surety services to the oil and gas, construction, manufacturing, and transportation industries.

•December – Marsh acquired Services Assurance Monétique (SAM), a France-based affinity insurance broker specializing in bank and retail insurance markets and increased its ownership interest in Marsh India Insurance Broker Private Limited ("Marsh India") from 49% to 92%.

The Consulting segment completed one acquisition during 2021:

•November – Oliver Wyman Group acquired Huron Consulting Group’s life sciences strategy consulting practice in the U.S. and the U.K., which assists clients in addressing their most important commercial strategy, marketing, pricing, market access and research and development challenges.

Prior year dispositions

There were no dispositions during the first three months of 2021.

Deconsolidation of Russia

In the first quarter of 2022, the Company concluded that it does not meet the accounting criteria for control over its wholly-owned Russian subsidiaries, and therefore, deconsolidated the businesses effective as of the end of the first quarter.

For the three months ended March 31, 2022, the Company recorded a loss of $39 million on the deconsolidation of the Russian businesses included in revenue in the consolidated statements of income. The loss consisted of the reclassification of cumulative translation losses from accumulated other comprehensive income and a charge for the write-off of the Russia businesses' net assets.

On March 10, 2022, the Company announced it would exit its businesses in Russia and transfer ownership of its Russian entities to local management who will operate independently in the Russian market. The closing of the transaction is subject to approval from the Russian regulators.

Subsequent event

On April 1, 2022, Mercer sold its U.S. affinity business that provides insurance marketing, brokerage and administration to association and affinity groups for cash proceeds of approximately $145 million and a net gain of approximately $110 million.

Pro-Forma Information

The following unaudited pro-forma financial data gives effect to the acquisitions made by the Company during 2022 and 2021. In accordance with accounting guidance related to pro-forma disclosures, the information presented for acquisitions made in 2022 is as if they occurred on January 1, 2021 and reflects acquisitions made in 2021 as if they occurred on January 1, 2020. The unaudited pro-forma information includes 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 March 31,
(In millions, except per share data)		2022		2021
Revenue		$	5,550	$	5,156

Net income attributable to the Company		$	1,071	$	987

Basic net income per share attributable to the Company		$	2.13	$	1.94


Diluted net income per share attributable to the Company		$	2.10	$	1.92