GLOBAL - Aon Hewitt will deliver cost savings of $355m (£235m) a year through cuts in both back and front office operations, Aon Corporation has said.
Yesterday, Aon Consulting and Hewitt Associates announced they were to merge to form a new consultancy in a $4.9bn deal. The agreement will see Aon Corporation merge Hewitt with its own consultancy business to form a new subsidiary named Aon Hewitt (GP Online, July 12).
However, in a briefing to investors, Aon revealed it expected to deliver $355m of annual cost savings by 2013 through cuts in back-office areas and public company costs; reductions in overlap in management and front-office areas; and leverage of technology and offshore capabilities.
It said it expected to incur restructuring costs of $249m ($168m of costs in 2011 and $81m in 2012).
It said synergies and greater economies of scale were anticipated to drive continued operational improvement across Aon Hewitt - and noted it expected to achieve a operating margin of 20% over the long-term, up from 15.1% currently.
Aon Corporation also said it believed Aon Hewitt would become the largest human resources consultancy in the world following the merger.
It said the Aon Hewitt would be number one in benefits outsourcing and human resources business process outsourcing employee benefits - as well a leader in employee benefits, retirement, investment management and compensation consultancy.
It said combined Aon Hewitt revenues would be about $4.3bn - $1bn more than its nearest rival, Mercer, which had revenues of $3.3bn in the year to December 31, 2009. Towers Watson said the combined revenue of Watson Wyatt and Towers Watson were $3.2bn in the year to June 30, 2009.
Aon Corporation said the deal would allow it to cross-sell its risk services products to Hewitt's client base - and enable Hewitt to cross-sell its benefits outsourcing and human resources business process outsourcing services to Aon's clients.
It said it expected to close the transaction by mid-November.
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