This is a significant development for the HR Services industry with Aon perhaps acknowledging that basic employee benefits services are commoditised and no longer a core channel for product distribution. Aon has spent many years building up this capability, principally through M&A, and it seems likely that the division will be snapped up by PE. Outsourced administrative services in the HR space are very attractive to PE for their recurring revenues.
There is clearly more to play out here. Will Aon keep any of the talent management or leadership development activities? Will Marsh & McLennan and Willis follow suit?
Insurance broker Aon Plc is exploring a sale of a division that other companies use to outsource the administration of employee benefits, potentially valuing it at more than $5 billion. The divestiture would undo much of Aon's $4.9 billion acquisition of human resources services provider Hewitt Associates Inc in 2010, signalling the company now wants to focus more on its insurance and risk management businesses. Aon is working with investment bank Morgan Stanley (MS.N) on a sale process for the unit, that has attracted interest from private equity firms, the people said on Wednesday. There is no certainty that Aon will decide to sell the business, which has 12-month EBITDA of close to $500 million. Aon shares jumped as much as 1.5 percent on the news to $114.90, giving the company a market capitalization of approximately $30 billion.