It is a good time to be an M&A banker. Neptune kitchens and oversized hot tubs beckon, come bonus time. In the first half of 2021 global big-ticket M&A clocked up $2.8 trillion in deal activity. $2.8 trillion. This is the fizziest first half on record for both value and volume. Indeed, a wide-eyed Matt Toole – Director of Deals Intelligence at Refinitiv – said he’s never seen anything like it. Artificially low rates continue to grease the wheels. Valuations crushed by the pandemic also add some juice and the fabled war chest of the private equity moguls puts more heat into any bid. Whilst it has been widely touted that deal mongering executives fail to create value, largely on account of a report out of Bain & Co in 2004, it is not so clear cut. Measuring the success of M&A is an inexact science, with no real consensus on how to go about it. Inevitably success is largely borne out of management’s ability to execute. One recent deal that failed to get to the signing ceremony with a suite full of tired looking lawyers, was the global insurance broker Aon’s proposed megamerger with fellow big boy Wills Towers Watson. A fed up Aon management called things off citing a sticky “impasse” with the US Department of Justice. When news broke, the shares of Aon popped a near 10% as the market shrugged off the $1bn break-fee and applauded the decision to “move forward independently”. Irrespective of the merits of the deal, a standalone Aon is – no question – a cleaner investment case. An investment case that boils down to defensive, resilient growth courtesy of recurring revenue, a near oligopoly amongst large accounts, and the potential for faster growth in super hot areas of risk, like cyber. As many internal measures flash amber on a wider market that is beginning to get a little taut-around-the-chops, the steady compounding merits of an up-for-it Aon should begin to court some significant interest.


The securities mentioned in this blog may be held by funds managed by Majedie Asset Management Ltd.