According to Aviva chairman John McFarlane, the deal will consolidate the organisation’s market-leading position in the UK and allow a much stronger dividend flow and balance sheet position than would have been possible otherwise.
Also in December, Sodexo acquired incentive and recognition provider Motivcom, which owns brands including P&MM Employee Benefits, AYMTM, Allsave, Filmology and The Voucher Shop.
The deal means Sodexo will now be able to offer a range of programmes, including recognition, employee benefits, sales promotions and incentives.
Consolidation also took place in the intermediary market during 2014, with Aon completing its acquisition of Lorica Employee Benefits in June and Arthur J Gallagher taking over The Oval Group. These moves followed JLT’s acquisition of Alexander Forbes Consultants and Actuaries for £17 million in October 2012.
There are number of reasons behind such deals, including improvements in the economy helping to create the right climate for consolidation.
Jon Bryant, London area director at Aon Employee Benefits, attributed the consolidation to regulatory changes, such as pensions auto-enrolment and the Retail Distribution Review (RDR).
“The market is also changing,” he said. “Post auto-enrolment and post-RDR, there has been a blurring of the lines in some areas. For example, Aviva and Friends Life are becoming broadly like intermediaries and Aon, for example, post-Lorica has become a product provider.”
Market consolidation is good news for benefits professionals.
Hugh Nolan, chief actuary at JLT Employee Benefits, said: “While consolidation obviously reduces the overall number of players in the market, whether employee benefits or insurance, both markets still have plenty of competition and choice.”
Integrated product and service offerings may also provide better value for money, as well as fewer competing products from which to choose.
Meanwhile, for providers, the obvious business benefits arising from mergers are greater brand recognition and better economies of scale, which are reasons why consolidation is likely to continue.
JLT’s Nolan added: “With credit likely to remain cheap for some time and confidence in the economy steadily increasing, consolidation deals may continue to emerge over the coming months.”