Aon adds Hewitt Associates into the mix

Hot off the presses today is the news that riskmanagement consultancy AonCorporationhas agreed to purchase HewittAssociatesfor $4.9 billion in cash and stock. The acquisition, which isexpected to be finalized by November, will expand Aon's global presence in theHR consulting biz, and will result in about $355 million in cost savings yearlythrough 2013, mainly through back-office staff reductions and streamlining technologyredundancies.

Hewitt will become part of Aon's consulting andoutsourcing arm, which will be rebranded as Aon Hewitt. Russ Fradin, Hewitt'scurrent chairman and CEO will lead the combined entity.

While Aon already has some presence in the HR consultingspace, its main business still lies in the insurance arena. The the Hewittpurchase will expand its HR footprint in a major way, and the two together willbe able to cover a large swath of over 120 countries worldwide. This willposition Aon to compete more directly with its primary insurance opponent Marsh& McLennan, which also houses the very successful Oliver Wyman andHR-focused Mercer consulting arms.

“It’s definitely going to make them a muchmore consulting operation than they were before,” said Paul Newsome, an analystwith Sandler O’Neill & Partners LP in Chicago. “There’s going to be somescale benefits. The other thing they get is better recognition. I think from apure consulting perspective Hewitt is a better name than Aon.” As AonCEO Greg Case said of the acquisition, "This merger will give us a broaderportfolio of innovative products and services focused on what we believe aretwo of the most important topics in the global economy today: risk and people."