Acquisitions

6 Months Ended

Jun. 30, 2011

Acquisitions

Acquisitions

7.     Acquisitions

During the first six months of 2011 the Company made three acquisitions in its Risk and Insurance Services segment and two in its Consulting segment. In January 2011, Marsh acquired RJF Agencies, Inc., an independent insurance broking firm in the Midwest. In February 2011, Marsh acquired Hampton Roads Bonding, a surety bonding agency for commercial, road, utility, maritime and government contractors in the state of Virginia, and the Boston office of Kinloch Consulting Group, Inc. These acquisitions were made to expand Marsh's share in the middle-market through Marsh & McLennan Agency.

In January 2011, Mercer acquired Hammond Associates, an investment consulting company for endowments and foundations in the U.S. In June 2011, Mercer acquired Evaluation Associates LLC, an investment consulting firm.

Total purchase consideration for the 2011 acquisitions was $114 million which consisted of cash paid of $101 million, and estimated contingent consideration of $13 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. The Company also paid $15 million of deferred purchase consideration related to acquisitions made in prior years.

In the second quarter of 2011, Marsh acquired the remaining minority interest of a previously majority owned entity for total purchase consideration of $8 million and accounted for this acquisition under the guidance for consolidations and non-controlling interests. This guidance requires that changes in a parent's ownership interest while retaining financial controlling interest in a subsidiary be accounted for as an equity transaction. Stepping up the acquired assets to fair value or the recording of goodwill is not permitted. Therefore, the Company recorded a decrease to additional paid-in capital in 2011 of $2 million related to this transaction.

In the first quarter of 2011, the Company paid deferred purchase consideration of $13 million related to the purchase in 2009 of the minority interest of a previously controlled entity.

The following table presents the preliminary allocation of the acquisition cost to the assets acquired and liabilities assumed, based on their fair values (amounts in millions):

Cash	$	101
Contingent consideration		13
Total Consideration	$	114
Allocation of purchase price:
Cash and cash equivalents	$	3
Accounts receivable, net		5
Property, plant, and equipment		2
Intangible assets		45
Goodwill		76
Total assets acquired		131
Current liabilities		11
Other liabilities		6
Total liabilities assumed		17
Net assets acquired	$	114

Prior Year Acquisitions

During the first six months of 2010, the Company made four acquisitions in its Risk and Insurance Services segment, two of which were made in the second quarter of 2010.

During the first quarter of 2010, the Company made two acquisitions in its Risk and Insurance Services segment. In February 2010, Marsh acquired Haake Companies, Inc., an independent insurance broking firm in the Midwest. In March 2010, Marsh acquired Thomas Rutherfoord, Inc., an insurance broking firm in the Southeast and mid-Atlantic regions in the U.S. These acquisitions were made to expand Marsh's share in the middle-market through Marsh & McLennan Agency.

On April 1, 2010, Marsh completed the acquisition of HSBC Insurance Brokers Ltd. This transaction deepens Marsh's presence in the U.K., Hong Kong, Singapore, China and the Middle East. As part of the acquisition agreement, Marsh also entered into a strategic partnership with HSBC Bank that gives the Company preferred access to provide insurance broking and risk management services to HSBC and their corporate and private clients. On April 30, 2010, Marsh & McLennan Agency acquired the Bostonian Group, one of the largest regional insurance brokerages in New England. This transaction increases Marsh's middle market presence. During the first quarter of 2010, Marsh acquired Haake Companies, Inc., one of the largest independent insurance broking firms in the Midwest, and Thomas Rutherfoord, Inc., one of the largest insurance broking firms in the Southeast and mid-Atlantic regions in the U.S. These acquisitions were made to expand Marsh's share in the middle-market through Marsh & McLennan Agency.

Total purchase consideration for the four acquisitions made during the first six months of 2010 was $472 million which consisted of cash paid of $239 million, the issuance of 7.4 million shares with a fair value of $178 million, and estimated contingent consideration of $55 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 earnings projections of the acquired entities. Estimated fair values of assets acquired and liabilities assumed are subject to adjustment when purchase accounting is finalized.

In 2010, the Company also paid $14 million of deferred purchase consideration and $2 million of contingent purchase consideration related to acquisitions made in prior years.

In the first quarter of 2010, the Company paid deferred purchase consideration of $15 million related to the purchase in 2009 of the minority interest of a previously controlled entity.

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 2011 and 2010. 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, 2010. 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.

	Three Months Ended June 30,					Six Months Ended June 30,
(In millions, except per share data)	2011		2010			2011		2010
Revenue	$	2,930	$	2,655		$	5,818	$	5,413
Income (loss) from continuing operations	$	287	$	(27	)	$	606	$	252
Net income attributable to the Company	$	282	$	239		$	607	$	491
Basic net income (loss) per share:
– Continuing operations	$	0.51	$	(0.06	)	$	1.08	$	0.44
– Net income attributable to the Company	$	0.51	$	0.43		$	1.11	$	0.89
Diluted net income (loss) per share:
– Continuing operations	$	0.50	$	(0.06	)	$	1.06	$	0.44
– Net income attributable to the Company	$	0.51	$	0.43		$	1.09	$	0.89

The Consolidated Statements of Income for the three and six months ended June 30, 2011 includes approximately $17 million of revenue and $3 million of net operating income and approximately $34 million of revenue and $6 million of net operating income, respectively, related to acquisitions made during 2011.