July 24, 2024

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Marsh & McLennan’s (MMC) Unit Buyout Will Boost Portfolio

Marsh & McLennan Companies, Inc.’s MMC unit Marsh has acquired Assurance Holdings, Inc., one of the leading independent agencies in the United States. The buyout was mainly executed by the middle market agency unit of Marsh known as the Marsh & McLennan Agency LLC (MMA). However, further terms of the deal were kept under wraps.

Rationale Behind the Deal

Located in Schaumburg, IL, Assurance is a full-service brokerage providing business insurance, employee benefits, private client insurance and retirement services to businesses and individuals across the country.

Assurance will now work as the Midwest regional headquarters for MMA, boosting its portfolio by adding to its capabilities.

Over the past decade, MMA has grown into a $2-billion revenue platform catering to midsize business houses and individuals in the country. The latest addition is the continuation of its commitment to enhance its service portfolio.

The deal was inked amid high market volatility with insurers facing steep claims and new threats in the wake of the coronavirus outbreak. The combination of both companies is expected generate better results.

Acquisitions form a major growth strategy at Marsh & McLennan. In January, Marsh bought Ironwood Insurance Services, LLC, one of the leading independent brokers in the Southeast. This Zacks Rank #3 (Hold) company made numerous purchases within its different operating units, which enabled it to enter new geographies, expand within the existing ones, foray into new businesses, develop new segments and specialize within its existing operations. All these initiatives bode well for the long haul.

Other Buyouts in the Same Space

It is also the right time to take advantage of the evolving private equity, merger and acquisition space, which holds ample growth opportunities for the industry players.

Given the significant capital available, the leading players in the industry are acquiring companies to add to their capabilities. Aon plc AON entered into an agreement with Willis Towers Watson Public Limited Company WLTW to merge in an all-stock deal, which is expected to address the unmet client requirements and fight the evolving insurance industry risks. This acquisition is touted as the insurance sector’s largest deal, which likely close in the first half of 2021.

Continuing with its aggressive acquisition strategy, Arthur J. Gallagher & Co. AJG closed the buyout of McConnell, Manit & Trout Insurance Services, LLC last month.

We expect all these efforts to not only help enhance the companies’ abilities but also combat the risks involved, such as climate change, cybersecurity, etc.

Price Performance

In a year’s time, Marsh & McLennan has lost 13.4%, wider than its industry’s fall of 8.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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