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Acquisitions and Dispositions | 9 Months Ended
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Sep. 30, 2023
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 eight acquisitions during the nine months ended September 30, 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 Marsh & McLennan Agency ("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. The Consulting segment completed four acquisitions for the nine months ended September 30, 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. Total purchase consideration for acquisitions made during the nine months ended September 30, 2023 was $711 million, which consisted of cash paid of $682 million and deferred purchase and estimated contingent consideration of $29 million. Contingent consideration arrangements are generally based on earnings before interest, tax, depreciation and amortization ("EBITDA") or revenue targets over a period of two to four years. During the nine months ended September 30, 2023, the Company also paid $52 million of deferred purchase consideration and $176 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 in 2023, based on the estimated fair values for the acquisitions as of their respective acquisition dates. Amounts in the table primarily reflect the impact of the Westpac Transaction and the acquisition of Graham Company.
Acquisitions through September 30, 2023 |  |  |
(In millions) |  |  |
Cash | $ | 682 |  |  |
Estimated fair value of deferred/contingent consideration | 29 |  |  |
Total consideration | $ | 711 |  |  |
Allocation of purchase price: |  |  |
Cash and cash equivalents | $ | 27 |  |  |
Cash and cash equivalents held in a fiduciary capacity | 14 |  |  |
Net receivables | 28 |  |  |
Other current assets | 4 |  |  |
Goodwill | 480 |  |  |
Other intangible assets | 255 |  |  |
Fixed assets, net | 2 |  |  |
Right of use assets | 12 |  |  |
Other assets | 1 |  |  |
Total assets acquired | 823 |  |  |
Current liabilities | 52 |  |  |
Fiduciary liabilities | 14 |  |  |
Other liabilities | 46 |  |  |
Total liabilities assumed | 112 |  |  |
Net assets acquired | $ | 711 |  |  |
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 other intangible assets acquired in 2023:
Other intangible assets through September 30, 2023 (In millions) |  | Amount |  | Weighted Average Amortization Period
Client relationships |  | $ | 246 |  |  | 13.0 years
Other |  | 9 |  |  | 5.0 years
Total other intangible assets |  | $ | 255 |  |  |
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 and nine months ended September 30, 2023, include revenue of approximately $50 million and $91 million, respectively, and operating income of $5 million and $14 million, respectively, for acquisitions made in 2023. The consolidated statements of income for the three and nine months ended September 30, 2022 include revenue of approximately $16 million and $22 million, respectively, and operating loss of $1 million for both three and nine months ended September 30, 2022, for acquisitions made in 2022. In relation to the Westpac Transaction, the Company incurred approximately $5 million and $32 million of integration expenses for the three and nine months ended September 30, 2023, respectively, primarily for technology, consulting, legal and people related costs. These costs are included in other operating expenses in the Company's consolidated statements of income. 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 $17 million for the nine months ended September 30, 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. Prior year acquisitions The Risk and Insurance Services segment completed sixteen acquisitions in 2022: •January – MMA acquired Heil & Kay Insurance Agency Inc., an Illinois-based full-service broker providing business insurance, employee health benefits services and personal lines insurance. •April – Marsh acquired the business of Regional Treaty Services Corporation, a Rhode Island-based managing general underwriter, which manages reinsurance facilities for small to midsize U.S.-based insurers primarily writing personal lines, small agriculture, and main street commercial business. •June – MMA acquired Clark Insurance, a Maine-based full-service broker providing business insurance, employee health and benefits and private client services to businesses and individuals across the region. •July – MMA acquired CS Insurance Strategies, Inc., an Illinois-based full-service broker providing employee health and benefits, business insurance, and risk management consulting services to organizations of all sizes across the U.S. and Suchanek Partners LLC, an Ohio-based employee benefits insurance broker. •August – Marsh acquired Best Insurance Co. Ltd, a Japan-based insurance broker that provides affinity type schemes, general and personal lines insurance. •September – MMA acquired Steinberg & Associates, Inc., a South Carolina-based insurance broker that primarily offers employee health benefit services to group clients and Leykell, Inc., a Texas-based full-service broker that provides specialty insurance focused on trade credit. •October – MMA acquired Galbraith Group, a Texas-based employee health and benefits insurance broker. •November – MMA acquired Focus Insurance and Financial Services, a Texas-based personal insurance broker and Bradley Insurance Agency, a commercial insurance broker in Knoxville, Tennessee, with expertise serving the hospitality and construction industries. Marsh increased its ownership interest in Beassur SARL, a Morocco-based multi-line insurance broker, from 35% to 70%. •December – MMA acquired McDonald-Zaring Insurance, Inc., a Washington-based full-service broker focused on agri-business, wineries, crops and contractors, Chartwell Insurance Brokers, Inc., a Massachusetts-based full-service broker that specializes in commercial Property & Casualty insurance in the technology, financial services and non-profit space, and HMS Insurance Associates, Inc., a Maryland-based full-service broker providing commercial, surety, employee benefits, and personal lines insurance. Marsh acquired BHM Consultores S.A., d/b/a Grupo Mesos, a leading auto affinity insurance broker specialist in Chile that has extensive distribution partnerships with car dealerships, original equipment manufacturers and auto finance companies. The Consulting segment completed four acquisitions in 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. •September – Oliver Wyman acquired Booz Allen Hamilton's strategy consulting business serving the Middle East and North Africa. •November – Oliver Wyman acquired the Avascent Group Ltd, an aerospace and defense management consulting firm focused on the corporate and private equity sectors based in the U.S., U.K., Canada and France. Total purchase consideration for acquisitions made for the nine months ended September 30, 2022 was approximately $227 million, which consisted of cash paid of $210 million and deferred purchase and estimated contingent consideration of $17 million. Contingent consideration arrangements are based primarily on EBITDA or revenue targets over a period of two to four years. For the first nine months of 2022, the Company also paid $116 million of deferred purchase consideration and $66 million of contingent 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 April 2022, Mercer sold its U.S. affinity business that provided insurance marketing, brokerage and administration to association and affinity groups for cash proceeds of approximately $140 million and recorded a gain of $112 million which is included in revenue in the consolidated statements of income. In addition, during the first nine months of 2022, the Company sold certain businesses in Brazil and U.K. for cash proceeds of approximately $7 million. Deconsolidation of Russia In the first quarter of 2022, the Company concluded that it did not meet the accounting criteria for control over its wholly-owned Russian subsidiaries due to the evolving trade and economic sanctions against Russia and the related Russian counter sanctions. These sanctions included restrictions on payments to and from Russian companies and reduced currency access through official exchange markets that have significantly impacted the Company's ability to effectively manage and operate its Russian businesses. As a result, the Company deconsolidated its Russian businesses effective as of the end of the first quarter of 2022, and recorded a loss of $39 million included in revenue in the consolidated statements of income. The loss consisted of the reclassification of cumulative translation losses from AOCI and a charge for the write-off of the Russian businesses' net assets. In June 2022, the Company entered into a definitive agreement to exit its businesses in Russia and transfer ownership to local management pending regulatory approvals. 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 2023 and 2022. In accordance with accounting guidance related to pro-forma disclosures, the information presented for acquisitions made in 2023 is as if they occurred on January 1, 2022, and reflects acquisitions made in 2022, as if they occurred on January 1, 2021. 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 September 30, |  | Nine Months Ended September 30,
(In millions, except per share data) | 2023 |  | 2022 |  | 2023 |  | 2022
Revenue | $ | 5,389 |  |  | $ | 4,880 |  |  | $ | 17,290 |  |  | $ | 16,067 |
Net income attributable to the Company | $ | 737 |  |  | $ | 555 |  |  | $ | 3,035 |  |  | $ | 2,568 |
Basic net income per share attributable to the Company | $ | 1.49 |  |  | $ | 1.11 |  |  | $ | 6.14 |  |  | $ | 5.13 |
Diluted net income per share attributable to the Company | $ | 1.48 |  |  | $ | 1.10 |  |  | $ | 6.08 |  |  | $ | 5.07 |

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205-20/tableOfContent + Details
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