This business processes the work benefits of roughly 15% of the current U.S. population.
As per people familiar with the matter at hand, Blackstone Group LP has agreed to acquire Aon Plc’s employee benefits outsourcing business for nearly $4.8 billion.
In what could be a win-win deal for both parties, while the deal will provide Blackstone the ownership of a business which processes the work benefits of almost 15% of the U.S. population, for Aon the deal makes sense since it allows it to exit a capital-intensive outsourcing business and thus expand its operations beyond its core insurance brokerage operations, into areas including cyber security and health insurance.
To snag the deal, Blackstone ousted Clayton Dubilier & Rice LLC, a buyout firm during the auctioning process, with its assurances that it can successfully run the operations of the unit, said the people who prefer to remain anonymous since the negotiations are confidential.
When asked to respond to requests for comment, Aon and Clayton Dubilier & Rice declined comment.
Blackstone could not be immediately reached for comment.
Anchored in London, Aon’s insurance brokerage is active in more than 120 countries.
“The potential divestiture of the outsourcing business moves Aon away from the most mature and lower growth area of the business. Selling the benefits administration business would therefore be consistent with the actions to improve the business mix,” wrote analyst William Blair in a note to clients.
The participation of private equity firms have gone up lately with them being prolific investors in businesses that help companies cut costs by outsourcing significant portions of their administrative functions and thereby help the business to generate stronger cash flows.
Once the business is back on track and generates healthier cash flows, private equity firms tend to sell ownership and make a chunk of profit.