Aon, which like Willis Towers is based in London but listed in New York, fell 3.6 percent to $164.57, giving it a market value of about $39.5 billion. Trading of its shares was halted at 12:57 p.m. in New York pending an announcement.

A representative for Aon declined to comment. A spokesman for Willis Towers Watson said the company doesn't comment on market rumors and speculation.

Brokerages, which help connect businesses looking for coverage with insurers, have been aggressively merging to diversify, boost commissions and serve customers who increasingly want to deal with fewer intermediaries.

GTCR deal

The industry started 2019 with a sizable deal. Private equity firm GTCR LLC and other buyers agreed in February to buy a majority stake in AssuredPartners Inc. from Apax Partners. That transaction valued AssuredPartners at about $5.1 billion, according to people familiar with the matter.

The Aon and Willis Towers “potential transaction would put together two very large global insurance broking companies that are also engaged in a number of human resources and management consulting practices,” Harry Fong, an analyst at MKM Partners, said Tuesday in a note to clients.

Buying Willis Towers might enable Aon to overtake Marsh & McLennan Cos. as the world's largest brokerage by revenue, according to data compiled by Bloomberg. Willis Towers is the world's third-biggest brokerage, while Aon is No. 2.

That boost could help Aon and Willis Towers compete against a rival that's continued to grow in recent years. Marsh & McLennan last year struck its largest deal with a $5.7 billion agreement to buy Jardine Lloyd Thompson Group Plc. Those companies expect to close the transaction this year.

Willis Towers was formed in 2016 through Willis Group Holdings Plc's $8.9 billion acquisition of the consultancy Towers Watson & Co., the largest insurance broker deal to date.

A transaction with Aon could create more discontent among Willis Towers employees, who would have to contend with another restructuring, according to analyst Meyer Shields at Keefe Bruyette & Woods.

While Aon has demonstrated its ability to acquire and integrate other companies, the combination could create inefficiencies affecting revenue in some brokerage and consulting operations, he said.

'Big overhang'

Aon and Willis Towers deal would be a mash-up of two of the largest insurance brokers. That size could hinder any transaction, according to Wells Fargo & Co. analyst Elyse Greenspan.

“We see regulatory issues being a big overhang for a deal due to the size of both companies and are not convinced a deal can come to fruition,” Greenspan said in a note to clients.

Rival Marsh & McLennan, which is currently seeking approvals for its own deal, agreed to hive off JLT's aerospace business because of an overlap in that market as part of the European Commission's review of that deal.

Aon and Willis Towers would likely be required to divest overlapping businesses, Shields said.

“I would have to think there would have to be more examples of businesses that a combination of Aon and Willis would have to sell,” Shields said. “I would think there would be an awful lot of areas of excess concentration.”

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