Acquisitions and Dispositions

3 Months Ended

Mar. 31, 2024

Business Combination and Asset Acquisition [Abstract]

Acquisitions and Dispositions

Acquisitions and Dispositions

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 2 acquisitions for the three months ended March 31, 2024:

•January – Marsh acquired NOSCO Insurance Service Company Ltd., a Japan-based insurance broker that provides affinity type schemes, corporate and personal lines insurance.

•March – Marsh & McLennan Agency ("MMA") acquired Lousiana-based insurance brokers, Querbes & Nelson ("Q&N") and Louisiana Companies. Q&N offers business insurance, employee benefits, and alternative risk financing consulting to a variety of businesses with specific expertise in energy services, commercial contractors, and transportation. Louisiana Companies provides business and personal lines insurance to businesses and individuals with specific expertise in the construction, manufacturing, distributor, healthcare, and hospitality industries.

The Consulting segment completed 4 acquisitions for the three months ended March 31, 2024:

•February – Oliver Wyman Group acquired SeaTec Consulting Inc., a Georgia-based firm that provides consulting, engineering, and digital expertise across the aviation, aerospace and defense, and transportation industries.

•March – Mercer acquired Vanguard's Institutional Advisory Services business unit, a Pennsylvania-based outsourced chief investment officer ("OCIO") business, that provides investment management services for not-for-profit organizations and other institutional investors in the U.S. Mercer also acquired The Talent Enterprise, a United Arab Emirates-based psychometric and talent assessment technology company, that provides talent assessment tools and talent capability development solutions. Oliver Wyman Group acquired Innopay NL B.V., a Netherlands-based consultancy firm that delivers strategy, scheme development, and execution in the domain of digital payments, open finance, digital identity and data sharing.

Total purchase consideration for acquisitions made for the three months ended March 31, 2024 was $359 million, which consisted of cash paid of $308 million and deferred and estimated contingent purchase consideration of $51 million. Contingent purchase consideration arrangements are generally based on earnings before interest, tax, depreciation and amortization ("EBITDA") or revenue targets over a period of 2 to 4 years. The fair value of contingent purchase consideration was based on projected revenue and earnings of the acquired entities.

For the three months ended March 31, 2024, the Company also paid $3 million of deferred purchase consideration and $26 million of contingent purchase 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 in 2024, based on the estimated fair values for the acquisitions as of their respective acquisition dates.

Acquisitions through March 31, 2024
(In millions)
Cash	$	308
Estimated fair value of deferred/contingent purchase consideration	51
Total consideration	$	359
Allocation of purchase price:
Cash and cash equivalents	$	2
Cash and cash equivalents held in a fiduciary capacity	5
Net receivables	35
Goodwill	216
Other intangible assets	115
Fixed assets, net	3
Right of use assets	1
Other assets	2
Total assets acquired	379
Current liabilities	6
Fiduciary liabilities	5
Other liabilities	9
Total liabilities assumed	20
Net assets acquired	$	359

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 1 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 other intangible assets acquired in 2024:

Other intangible assets through March 31, 2024 (In millions)	Amount		Weighted Average Amortization Period
Client relationships	$	112	10.9 years
Other	3		2.8 years
Total other intangible assets	$	115

The consolidated statements of income include the results of operations of acquired companies since their respective acquisition dates. The consolidated statements of income for the three months ended March 31, 2024, include revenue of approximately $14 million and an operating loss of $6 million for acquisitions made in 2024.

The Company incurred approximately $3 million and $17 million of integration expenses for the three months ended March 31, 2024 and 2023, respectively, for the Westpac Transaction, primarily for technology, consulting, legal and people related costs. Acquisition and integration costs are included in other operating expenses in the Company's consolidated statements of income.

Dispositions

On January 1, 2024, the Company sold its Mercer U.K pension administration and U.S. health and benefits administration businesses for approximately $114 million and recorded a net gain of $21 million, which is included in revenue in the consolidated statements of income.

As part of the disposition of the businesses, the Company incurred exit costs of $18 million. These costs are included in expenses in the Company's consolidated statements of income.

Prior year acquisitions

The Risk and Insurance Services segment completed 9 acquisitions in 2023:

•May – Marsh acquired Austral Insurance Brokers Pty Ltd, an Australia-based insurance broker that provides risk advice services and business insurance solutions in the labor hire, mining services, transport, manufacturing, agribusiness, retail and professional services sectors.

•June – Guy Carpenter acquired Re Solutions, an Israel-based reinsurance broker with actuarial and analytics capabilities and solutions, including an extensive facultative reinsurance offering, and MMA acquired SOLV Risk Solutions, LLC, a Texas-based risk management advisory services firm.

•July – MMA acquired Integrity HR, Inc., a Kentucky-based human resources consulting firm and Trideo Systems, an Illinois-based risk management information systems provider for health care organizations, and Marsh acquired Asprose Corredora de Seguros, a Costa Rica-based insurance broker that provides insurance brokerage and risk advisory services to commercial organizations.

•August – MMA acquired Graham Company, a Pennsylvania-based risk management consultancy and insurance and employee benefits broker, specializing in construction, real estate, manufacturing and distribution, health and human services and professional services.

•September – MMA acquired Blue Water Insurance LLC, a Kentucky-based employee health and benefits insurance broker.

•November – Marsh acquired HIG Australia Holdco Pty Ltd ("Honan Insurance Group"), an Australia-based insurance broker in the areas of corporate risk, employee benefits, and strata and real estate insurance.

The Consulting segment completed 5 acquisitions in 2023:

•March – Mercer acquired Leapgen LLC, a Minnesota-based human resources consulting technology advisory firm focused on digital strategy and transformation, workforce solutions, and improving employee experience.

•April – Mercer acquired Westpac Banking Corporation’s ("Westpac") financial advisory business, Advance Asset Management, and completed the transfer from Westpac of BT Financial Group's personal and corporate pension funds to the Mercer Super Trust managed by Mercer Australia (referred to collectively, as the "Westpac Transaction"). Oliver Wyman Group acquired the business of Gorman Actuarial, Inc., a Massachusetts-based life and health actuarial consultant business.

•July – Oliver Wyman Group acquired the actuarial consulting business of ISC Strategies Consulting, Inc., a Florida-based life insurance and actuarial consulting firm.

•October – Mercer acquired BT Financial Group's Private Portfolio Management, an Australia-based wealth management business that provides investment solutions to not-for-profit organizations, high-net worth clients and their financial advisers.

Total purchase consideration for acquisitions made for the three months ended March 31, 2023 was approximately $15 million, which consisted of cash paid of $11 million and deferred and estimated contingent purchase consideration of $4 million. Contingent purchase consideration arrangements are generally based primarily on EBITDA or revenue targets over a period of 2 to 4 years.

For the first three months of 2023, the Company also paid $12 million of deferred purchase consideration and $1 million of contingent purchase consideration related to acquisitions made in prior years. Estimated fair values of assets acquired and liabilities assumed are subject to adjustment when purchase accounting is finalized.

Prior year dispositions

In January 2023, the Company entered into an agreement for the sale of an individual financial advisory business in Canada which was completed in May 2023. As a result, the Company recorded a loss of $19 million for the three months ended March 31, 2023, primarily related to the write-down of the customer relationship intangible assets. The loss is included in revenue in the consolidated statements of income.

In connection with the disposition of the Mercer U.S. affinity business in 2022, the Company transferred to the buyer an additional $20 million of cash and cash equivalents held in a fiduciary capacity in the first quarter of 2023.

Purchase of remaining non-controlling interest

In the second quarter of 2023, the Company purchased the remaining interest in a subsidiary for $139 million.

Pro-Forma Information

The following unaudited pro-forma financial data gives effect to the acquisitions made by the Company in 2024 and 2023. In accordance with accounting guidance related to pro-forma disclosures, the information presented for acquisitions made in 2024 is as if they occurred on January 1, 2023, and reflects acquisitions made in 2023, as if they occurred on January 1, 2022.

The unaudited pro-forma information includes the effects of amortization of acquired intangibles in all years. 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)	2024		2023
Revenue	$	6,505	$	6,055
Net income attributable to the Company	$	1,409	$	1,274
Basic net income per share attributable to the Company	$	2.86	$	2.57
Diluted net income per share attributable to the Company	$	2.84	$	2.55