On December 20, AON (AON.N) announced its acquisition of privately held NFP for $13.4 billion, targeting the expanding middle-market segment of insurance brokerage, wealth management, and retirement plan advisory. The deal is set to close in mid-2024, financed with $7 billion in cash and $6.4 billion in Aon stock, including a new debt raise of $5 billion in 2024.

In the context of resilient demand for insurance products, considered recession-proof due to employer guarantees and government mandates, Aon CFO Christa Davies outlined the funding structure. “The price does seem rich at 15 times expected adjusted EBITDA,” noted Brett Horn, a senior equity analyst at Morningstar, emphasizing Aon’s anticipation of $60 million in cost synergies.

This move follows Aon’s abandoned $30 billion merger with Willis Towers Watson in July 2021, which faced regulatory hurdles. Despite Aon shares declining 6% due to expected $400 million one-time costs, Davies expressed confidence in long-term adjusted operating margin expansion.

NFP, a property and casualty brokerage founded in 1999, specializes in benefits consulting, wealth management, and retirement plan consulting. CEO Doug Hammond will continue to lead the business. UBS Investment Bank and Citi served as exclusive financial advisors for Aon on the transaction and deal financing, respectively. Aon foresees NFP generating $2.2 billion in annual revenue in 2023, with an estimated 14% rise in total revenue forecasted for 2024 and 2025.

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