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Business Combinations | 12 Months Ended
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Dec. 31, 2024
Business Combinations [Abstract] |
Business Combinations | 3. Business Combinations During 2024, we acquired substantially all of the ownership interests or net assets, as applicable, of the following firms in exchange for our common stock and/or cash. These acquisitions have been accounted for using the acquisition method for recording business combinations (in millions, except share data):
Name and Effective Date of Acquisition |  | Common Shares Issued |  |  | Common Share Value |  |  | Cash Paid |  |  | Accrued Liability |  |  | Escrow Deposited |  |  | Recorded Earnout Payable |  |  | Total Recorded Purchase Price |  |  | Maximum Potential Earnout Payable |
|  | (000s) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ericson Insurance Services, LLC January 1, 2024 (EIS) |  |  | 129 |  |  | $ | 30.1 |  |  | $ | 26.5 |  |  | $ | — |  |  | $ | 3.0 |  |  | $ | 7.3 |  |  | $ | 66.9 |  |  | $ | 10.0 |
The Rowley Agency, LLC January 1, 2024 (TRA) |  |  | — |  |  |  | — |  |  |  | 117.2 |  |  |  | — |  |  |  | 11.0 |  |  |  | — |  |  |  | 128.2 |  |  |  | — |
OperationsInc, LLC June 1, 2024 (OPR) |  |  | — |  |  |  | — |  |  |  | 52.6 |  |  |  | — |  |  |  | 2.8 |  |  |  | 11.0 |  |  |  | 66.4 |  |  |  | 20.0 |
RIBV Holdings, LLC October 1, 2024 (RIBV) |  |  | — |  |  |  | — |  |  |  | 171.4 |  |  |  | 6.5 |  |  |  | 5.1 |  |  |  | 24.3 |  |  |  | 207.3 |  |  |  | 50.0 |
Redington Limited October 24, 2024 (RED) |  |  | — |  |  |  | — |  |  |  | 199.3 |  |  |  | 0.4 |  |  |  | 0.7 |  |  |  | — |  |  |  | 200.4 |  |  |  | — |
Forty-three other acquisitions completed in 2024 |  |  | 231 |  |  |  | 48.8 |  |  |  | 806.5 |  |  |  | 9.1 |  |  |  | 44.4 |  |  |  | 121.8 |  |  |  | 1,030.6 |  |  |  | 288.6 |
|  |  | 360 |  |  | $ | 78.9 |  |  | $ | 1,373.5 |  |  | $ | 16.0 |  |  | $ | 67.0 |  |  | $ | 164.4 |  |  | $ | 1,699.8 |  |  | $ | 368.6 |
On December 7, 2024, we signed a definitive agreement to acquire all of the issued and outstanding stock of Dolphin Topco, Inc., the holding company of AssuredPartners, Inc., a Delaware corporation (together with its subsidiaries, “AssuredPartners”) for gross consideration of $13.45 billion. The transaction is subject to customary regulatory approval, standard closing conditions and is expected to close during first quarter 2025. AssuredPartners is a leading U.S. insurance broker with client capabilities across commercial property/casualty, specialty, employee benefits and personal lines with operations in the U.K. and Ireland. We expect to fund the transaction using $8.5 billion of cash raised in our December 11, 2024 follow-on common stock offering and $5.0 billion of cash borrowed in our December 19, 2024 senior notes issuance (which we refer to, together with the follow-on common stock offering, as the AssuredPartners Financing). On January 7, 2025, we received an additional $1.28 billion of cash due to the exercise by the underwriters of the overallotment provision related to the follow-on common stock offering. Common shares issued in connection with acquisitions are valued at closing market prices as of the effective date of the applicable acquisition or on the days when the shares are issued, if purchase consideration is deferred. We record escrow deposits that are returned to us as a result of adjustments to net assets acquired as reductions of goodwill when the escrows are settled. The maximum potential earnout payables disclosed in the foregoing table represent the maximum amount of additional consideration that could be paid pursuant to the terms of the purchase agreement for the applicable acquisition. The amounts recorded as earnout payables, which are primarily based upon the estimated future operating results of the acquired entities over a two- to three-year period subsequent to the acquisition date, are measured at fair value as of the acquisition date and are included on that basis in the recorded purchase price consideration in the foregoing table. We will record subsequent changes in these estimated earnout obligations, including the accretion of discount, in our consolidated statement of earnings when incurred. The fair value of these earnout obligations is based on the present value of the expected future payments to be made to the sellers of the acquired entities in accordance with the provisions outlined in the respective purchase agreements, which is a Level 3 fair value measurement. In determining fair value, we estimated the acquired entity’s future performance using financial projections developed by management for the acquired entity and market participant assumptions that were derived for revenue growth and/or profitability. Revenue growth rates generally ranged from 3.0% to 19.0% for our 2024 acquisitions. We estimated future payments using the earnout formula and performance targets specified in each purchase agreement and the financial projections just described. We then discounted these payments to present value using a risk-adjusted rate that takes into consideration market‑based rates of return that reflect the ability of the acquired entity to achieve the targets. The discount rates generally ranged from 7.1% to 9.0% for our 2024 acquisitions. In some instances, the fair value of these earnout obligations can be based on other valuation methods including the Black-Scholes Option Pricing Method or Monte Carlo Simulation method. Changes in financial projections, market participant assumptions for revenue growth and/or profitability, or the risk-adjusted discount rate, would result in a change in the fair value of recorded earnout obligations. During 2024, 2023 and 2022, we recognized $61.7 million, $76.6 million and $61.0 million respectively, of expense in our consolidated statement of earnings related to the accretion of the discount recorded for earnout obligations in connection with our acquisitions. In addition, during 2024, 2023 and 2022, we recognized $35.7 million of income, $300.7 million of expense and $22.0 million of expense, respectively, related to net adjustments in the estimated fair value of the liability for earnout obligations in connection with revised assumptions due to changes in interest rates volatility and other assumptions and projections of future performance for 91, 80 and 89 acquisitions, respectively. The net adjustments during 2024, include changes made to the estimated fair value of the Willis Re acquisition earnout and reflect updated assumptions as of December 31, 2024. The aggregate amount of maximum earnout obligations related to acquisitions made in 2021 and subsequent years was $1,998.2 million as of December 31, 2024, of which $1,302.0 million was recorded in the consolidated balance sheet as of that date based on the estimated fair value of the expected future payments to be made, of which approximately $511.9 million can be settled in cash or common stock at our option and $790.1 million must be settled in cash. The aggregate amount of maximum earnout obligations related to acquisitions made in 2020 and subsequent years was $2,009.8 million as of December 31, 2023, of which $1,294.2 million was recorded in the consolidated balance sheet as of that date based on the estimated fair value of the expected future payments to be made, of which approximately $564.8 million can be settled in cash or common stock at our option and $729.4 million must be settled in cash. The following is a summary of the estimated fair values of the net assets acquired at the date of each acquisition made in 2024 (in millions):
|  | EIS |  |  | TRA |  |  | OPR |  |  | RIBV |  |  | RED |  |  | Forty-three Other Acquisitions |  |  | Total |
Cash and cash equivalents |  | $ | 0.1 |  |  | $ | 4.1 |  |  | $ | 0.8 |  |  | $ | 1.5 |  |  | $ | 19.9 |  |  | $ | 24.3 |  |  | $ | 50.7 |
Fiduciary assets |  |  | 1.0 |  |  |  | 2.6 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 49.5 |  |  |  | 53.1 |
Other current assets |  |  | 3.4 |  |  |  | 0.5 |  |  |  | 2.7 |  |  |  | 28.7 |  |  |  | 6.8 |  |  |  | 66.0 |  |  |  | 108.1 |
Fixed assets |  |  | — |  |  |  | 0.4 |  |  |  | — |  |  |  | 2.8 |  |  |  | 2.9 |  |  |  | 5.5 |  |  |  | 11.6 |
Noncurrent assets |  |  | 0.1 |  |  |  | 1.7 |  |  |  | 2.0 |  |  |  | 0.2 |  |  |  | 3.6 |  |  |  | 9.2 |  |  |  | 16.8 |
Goodwill |  |  | 29.6 |  |  |  | 59.4 |  |  |  | 41.9 |  |  |  | 92.4 |  |  |  | 107.0 |  |  |  | 506.9 |  |  |  | 837.2 |
Expiration lists |  |  | 34.2 |  |  |  | 64.1 |  |  |  | 22.1 |  |  |  | 98.7 |  |  |  | 84.2 |  |  |  | 488.2 |  |  |  | 791.5 |
Non-compete agreements |  |  | 0.2 |  |  |  | 0.3 |  |  |  | 0.2 |  |  |  | 0.2 |  |  |  | 8.8 |  |  |  | 13.9 |  |  |  | 23.6 |
Trade names |  |  | 0.2 |  |  |  | — |  |  |  | — |  |  |  | 0.9 |  |  |  | — |  |  |  | 0.8 |  |  |  | 1.9 |
Total assets acquired |  |  | 68.8 |  |  |  | 133.1 |  |  |  | 69.7 |  |  |  | 225.4 |  |  |  | 233.2 |  |  |  | 1,164.3 |  |  |  | 1,894.5 |
Fiduciary liabilities |  |  | 1.0 |  |  |  | 2.6 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 49.5 |  |  |  | 53.1 |
Current liabilities |  |  | 0.8 |  |  |  | 0.6 |  |  |  | 1.1 |  |  |  | 11.9 |  |  |  | 5.9 |  |  |  | 37.3 |  |  |  | 57.6 |
Noncurrent liabilities |  |  | 0.1 |  |  |  | 1.7 |  |  |  | 2.2 |  |  |  | 6.2 |  |  |  | 26.9 |  |  |  | 46.9 |  |  |  | 84.0 |
Total liabilities assumed |  |  | 1.9 |  |  |  | 4.9 |  |  |  | 3.3 |  |  |  | 18.1 |  |  |  | 32.8 |  |  |  | 133.7 |  |  |  | 194.7 |
Total net assets acquired |  | $ | 66.9 |  |  | $ | 128.2 |  |  | $ | 66.4 |  |  | $ | 207.3 |  |  | $ | 200.4 |  |  | $ | 1,030.6 |  |  | $ | 1,699.8 |
Among other things, these acquisitions allow us to expand into desirable geographic locations, further extend our presence in the retail and wholesale insurance and reinsurance brokerage markets and increase the volume of general services currently provided. The excess of the purchase price over the estimated fair value of the tangible net assets acquired at the acquisition date was allocated to goodwill, expiration lists, non-compete agreements and trade names in the amounts of $837.2 million, $791.5 million, $23.6 million and $1.9 million, respectively, within the brokerage and risk management segments. The fair value of the tangible assets and liabilities for each applicable acquisition at the acquisition date approximated their carrying values. In general, the fair value of expiration lists was established using the excess earnings method, which is an income approach based on estimated financial projections developed by management for each acquired entity using market participant assumptions. Revenue growth and attrition rates generally ranged from 0.7% to 5.3% and 5.0% to 13.5% for our 2024 and 2023 acquisitions, respectively, for which valuations were performed in 2024. We estimate the fair value as the present value of the benefits anticipated from ownership of the subject expiration list in excess of returns required on the investment in contributory assets necessary to realize those benefits. The rate used to discount the net benefits was based on a risk-adjusted rate that takes into consideration market-based rates of return and reflects the risk of the asset relative to the acquired business. These discount rates generally ranged from 9.5% to 11.5% for our 2024 and 2023 acquisitions, for which valuations were performed in 2024. The fair value of non-compete agreements was established using the profit differential method, which is an income approach based on estimated financial projections developed by management for the acquired company using market participant assumptions and various non-compete scenarios. Provisional estimates of fair value are established at the time of each acquisition and are subsequently reviewed and finalized within the first year of operations subsequent to the acquisition date to determine the necessity for adjustments. During this period, we may use independent third-party valuation specialists to assist us in finalizing the fair value of assets acquired and liabilities assumed. Fair value adjustments, if any, are most common to the values established for amortizable intangible assets, including expiration lists, non‑compete agreements, acquired software, and for earnout liabilities, with the offset to goodwill, net of any income tax effect. Expiration lists, non-compete agreements and trade names related to our acquisitions are amortized using the straight-line method over their estimated useful lives (two to fifteen years for expiration lists, two to six years for non-compete agreements and two to fifteen years for trade names), while goodwill is not subject to amortization. We use the straight-line method to amortize these intangible assets because the pattern of their economic benefits cannot be reasonably determined with any certainty. We review all of our identifiable intangible assets for impairment periodically (at least annually) and whenever events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. In reviewing identifiable intangible assets, if the undiscounted future cash flows were less than the carrying amount of the respective (or underlying) asset, an indicator of impairment would exist and further analysis would be required to determine whether or not a loss would need to be charged against current period earnings as a component of amortization expense. Of the $791.5 million of expiration lists, $23.6 million of non-compete agreements and $1.9 million of trade names related to the 2024 acquisitions, $239.8 million, $16.7 million and $0.5 million, respectively, is not expected to be deductible for income tax purposes. Accordingly, we recorded a deferred tax liability of $64.9 million, and a corresponding amount of goodwill, in 2024 related to the nondeductible amortizable intangible assets. Our consolidated financial statements for the year ended December 31, 2024 include the operations of the acquired entities from their respective acquisition dates. The following is a summary of the unaudited pro forma historical results, as if these entities had been acquired at January 1, 2023 (in millions, except per share data):
|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |
Total revenues |  | $ | 11,766.9 |  |  | $ | 10,458.0 |
Net earnings attributable to controlling interests |  |  | 1,457.0 |  |  |  | 963.1 |
Basic net earnings per share |  |  | 6.61 |  |  |  | 4.47 |
Diluted net earnings per share |  |  | 6.48 |  |  |  | 4.38 |
The unaudited pro forma results above have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had these acquisitions occurred at January 1, 2023, nor are they necessarily indicative of future operating results. Annualized revenues of entities acquired in 2024 totaled approximately $386.5 million. Total revenues, pre-tax loss and net earnings before interest, income taxes, depreciation, amortization and the change in estimated acquisition earnout payables recorded in our consolidated statement of earnings for 2024 related to the 2024 acquisitions in the aggregate, were $169.2 million, $(18.0) million and $33.1 million, respectively.

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