The announcement that Aon and Willis Towers Watson (WTW) have called off their $30bn (£21.7bn) merger after the businesses reached an impasse with the US Department of Justice (DOJ) over competition issues did not come as a huge surprise to many.
While the two firms received approval (with conditions) for the merger by the European Commission in July, the tie-up had become increasingly bogged down over issues with the DOJ - issues which cumulated in the US agency filing a civil antitrust lawsuit on 16 June to stop the merger, claiming that the combination of the two firms would reduce competition for the business of American companies.
Aon and WTW had already initiated a number of disposals to try and meet the concerns of both EU and US competition authorities - including the sale of Aon's pensions consulting, pension insurance broking, pensions administration and investment consulting business in Germany to Lane Clark & Peacock; the disposal of Aon's US retirement business to private investment firm Aquiline and its Retiree Health Exchange operations to Alight; and the sale of Willis Re and a set of WTW corporate risk and broking and health and benefits services to Arthur J. Gallagher.
As this merger case had been formally notified to Brussels before the end of the transition period following the UK's exit from the European Union on 31 December last year, the European Commission remained exclusively responsible for the case - meaning the UK's Competition and Markets Authority (CMA) did not open its own investigation into the deal.
But while the European Commission did not make any competition recommendations over Aon and WTW's UK's pensions and investment consulting businesses, the two firms clearly have a powerful position in the marketplace.
And while Aon and WTW said there were clear benefits to the combination of the two businesses, there are also good reasons why the collapse of the deal is of benefit to both schemes and trustees.
First, as the CMA's previous investment consultants market investigation had shown, Aon and WTW were already two of the biggest players in fiduciary management; both also have substantial defined contribution master trusts, and advise a significant chunk of the UK's pensions market.
Such a merger would have turned the big three of UK pensions into a big one plus one. Indeed, the UK pensions businesses of Aon and WTW had combined revenues of £772.6m in 2020. This was some 73% above Mercer's UK pensions revenue, which was, even after its merger with JLT Employee Benefits, just £446m in 2020.
Choice to UK sponsoring employers, schemes and trustees would therefore have been reduced by such a deal.
Second, while the CMA did not investigate the Aon / WTW deal, there is no guarantee it wouldn't have looked at the business or the market as a whole in the future. There is also no guarantee the combined Aon / WTW pensions businesses wouldn't have sold off one or more parts of its UK business in the future in order to avoid any such regulatory scrutiny in the coming years. This would create a degree of uncertainty for clients.
Added to this, there would have been transitional change as a result of the deal - with people changing roles, new structures being set-up and processes being harmonised.
There is also the question of adviser and provider concentration. There are a number of employers who could use one of either Aon or WTW for corporate advice while their scheme uses the other. Such a merger would have meant, for some, another round of tenders and yet more change.
While the fact that the merger is now off is clearly bad news for Aon and WTW, it has probably come as a small relief to schemes and trustees.