Shares of professional services provider Aon (NYSE:AON) are tanking today after the company agreed to acquire middle market services provider NFP in a $13.4 billion cash and stock deal. The M & A transaction involves a consideration of $6.4 billion in AON stock and $7 billion in cash. Aon is acquiring NFP from its primary capital sponsors, Madison Dearborn Partners and HPS Investment Partners.
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The deal is expected to enhance Aon’s presence in risk, benefits, wealth, and retirement plan advisory in the lucrative middle-market segment. In turn, NFP is seen benefitting from Aon’s global resources and distribution scale. This acquisition is expected to “generate more than $2.8 billion in value creation from the capitalized value of expected pre-tax synergies and capital structure”. However, the deal is expected to be dilutive to Aon’s adjusted EPS in 2025.
Further, Aon has reaffirmed its long-term objective of achieving a mid-single digit or greater organic revenue growth and expanding its operating margin. The deal remains subject to closing conditions and is anticipated to close in mid-2024.
Is AON Stock a Buy, Sell, or a Hold?
Shares of the company have trended nearly 5% lower over the past six months. Overall, the Street has a Hold consensus rating on Aon and the average AON price target of $336 points to a modest 7.3% potential upside in the stock.
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