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Services
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Mergers and acquisitions
Successful merger and acquisition deals are those which enable one or both of the buyer and the seller to realise key strategic objectives and enhance shareholder value. Choosing the right deal to maximise value added requires detailed analysis of opportunities. Ensuring that the price paid is reasonable given the likely benefits and the potential risks of the acquisition is of paramount importance to any buyer.
Watson Wyatt offers you first class, independent advice at all stages of a merger or acquisition. We have extensive experience of providing advice to sellers and purchasers of life and non-life insurance companies, from the initial formulation of an M&A strategy through to final implementation.
Advising the purchaser
In the initial stages of formulating an M&A strategy and locating potential target companies, we can help you to:
- clarify your business objectives and the part that M&A is intended to play in achieving these
- analyse potential new markets
- set the criteria to be used to identify and evaluate potential target companies
- identify companies that are likely to meet these criteria
- investigate possible target companies to assess their profitability and future prospects.
Once you have identified a potential acquisition, there follows the key period of investigation and negotiation. In this stage, we can assist by carrying out an independent review of the proposed purchase, including a full actuarial due diligence exercise. This may include some or all of the following elements:
- an assessment of the operational performance of the target company including both qualitative and quantitative input
- development of a business plan, including the quantification of synergies and potential cost savings
- identification and quantification of risks, including guarantees and options
- assessment of the potential capital requirements
- review of the adequacy of technical insurance reserves
- a review of the employee compensation and benefit structures operated by the target company including an actuarial assessment of pension liabilities and expenses
- consideration of the factors affecting the deal price including the value of in-force business, the profitability of new business, and the impact on your results
- assessment of the arguments and counter-arguments that may be used by the parties to the transaction during negotiations
- assistance in negotiations over both price and contractual terms
- participation in meetings with regulators and preparation of any regulatory submissions required.
Finally, however good a deal looks on paper, it is only in its implementation that the value forecast when assessing the deal can be realised. If the transaction proceeds, we can help you with the implementation process, for example in:
- refining and implementing the strategy and business plan for the new or merged company
- product selection and new product development
- distribution channel development
and remuneration structures
- financial management and reporting.
Many deals fail because of ‘people problems’. If managed well, significant returns can be achieved in terms of faster integration, lower deal costs, better customer focus and greater productivity. In conjunction with our human capital consulting colleagues, we can help you achieve this. We can provide assistance by:
- analysing partner or target company cultures and performance management systems
- supporting human capital integration across the enterprise
- redesigning and implementing a new human resource strategy for the ‘post-deal’ organisation.
Advising the seller
If you are considering selling an insurance business, we can:
- help you consider the options available, which might include, for example, selling only part of the business, selling blocks of business in a piecemeal fashion, or selling future business only and placing the existing portfolio in run-off
- review the operation of your business and advise on structural change that may help to maximise the sale price
- identify potential purchasers and contact them on your behalf to assess their level of interest
- prepare an appraisal of the company, including the elements of its value, for distribution to potential purchasers or publication in a sale prospectus
- participate in meetings with potential purchasers and provide them with additional information
- assist in negotiations over price and contractual terms.
Advice to mutuals
Special considerations apply to mutual life insurance companies since the interests of members and policyholders must be appropriately protected.
If you represent a company considering the acquisition of a mutual, in addition to the areas of advice referred to above, we can bring a wealth of experience to help you to:
- evaluate alternative demutualisation structures
- understand the demutualisation process, including the role of the regulators and independent actuary.
Alternatively, if you are the management or Board of a mutual we can help you to:
- consider the options available to the mutual (eg floatation, demutualisation and sale to a third party, closure of the fund)
- consider alternatives to demutualisation (including securitisation and other financing alternatives as a means of increasing regulatory capital)
- prepare a defence strategy in advance of receiving a hostile bid.
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Case studies
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We advise on an average of over 60 insurance M&A projects around the world each year. Some illustrative examples of recent major assignments are:
- Advising Lloyds TSB on its acquisition of Scottish Widows (UK). We assisted Lloyds TSB at all stages of this transaction. This included helping to identify Scottish Widows as the favoured target and to formulate the unique structure of the transaction. We also worked closely with the lawyers on the drafting of the demutualisation scheme and communications to policyholders.
- Advising Aviva on three recent acquisitions in Spain. The work involved providing opinions on the main components of economic value and on the main market and technical risks faced by the acquired companies.
- Actuarial appraisal value and reserve review work for Ping An Insurance Company of China to assist the company with its negotiations around the possible sale of a minority shareholding to a third party. This subsequently led to HSBC Insurance Holdings Limited taking a 10% stake in the company.
Other recent M&A projects include assignments in Belgium, Bulgaria, China, Croatia, Denmark, Finland, France, Germany, Greece, Hong Kong, Hungary, Indonesia, Ireland, Italy, Jamaica, Japan, Luxembourg, Malaysia, the Netherlands, Norway, the Philippines, Poland, Singapore, Slovakia, South Korea, Spain, Sweden, Switzerland, Thailand, Turkey and the United Kingdom. Much of this work is confidential to clients and not in the public domain. Assignments where our involvement has been public, or may be disclosed, include working for:
- Abbey National on the demutualisation and acquisition of Scottish Provident (UK)
- Achmea on the financial restructuring of the pension businesses of Avero and Centraal Beheer (Netherlands)
- Aegon on the acquisition of Guardian Life from Sun Life & Provincial (UK)
- Aviva on the acquisition on ICS (Singapore)
- Canada Life on the acquisition of Prudential Europe's German operations (Germany)
- Catalana on its flotation (Spain)
- The Croatian government on the sale of the state-owned insurance company (Croatia)
- Fortis on its acquisition of a 30% stake in Mayban Life and Mayban Assurance (Malaysia)
- GE Capital on the sale of GE Life Insurance Company, Inc. (Philippines)
- Goudse on the acquisition of Tiel Utrecht Verzekeringen from ING Group (Netherlands)
- Karstadt Quelle on the sale of its insurance operations to Ergo (Germany)
- The Life Insurance Policyholders’ Protection Corporation in connection with the restructuring of Chiyoda Mutual Life, Kyoei Life and Tokyo Mutual Life (Japan)
- Liverpool Victoria on the acquisition of the Royal National Pension Fund for Nurses (UK)
- New York Life and the Financial Supervisory Commission on the possible restructuring and subsequent acquisition of Kookmin Life (Korea)
- NPI on its demutualisation and sale to AMP (UK)
- Pacific Century Insurance Holdings Limited on its successful listing of shares on The Stock Exchange of Hong Kong
- PPP on its sale to GRE (UK)
- Royal London on the demutualisation and acquisition of Scottish Life (UK)
- Sampo-Leonia on the merger of Sampo Life and Leonia Life (Finland)
- Sun Life & Provincial Holdings on the sale of New Ireland to Bank of Ireland (Ireland)
- UAP on the merger of AXA's and UAP's Dutch operations (Netherlands)
- Winterthur on an actuarial due diligence investigation of Taikang Life (China).
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Client stories:
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