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Marsh & McLennan (MMC) Unit Buys Vanguard's US OCIO Business

Marsh & McLennan Companies, Inc.’s MMC business, Mercer, recently agreed to buy the outsourced chief investment officer (OCIO) business of Vanguard, a leading investment management firm. The move is expected to boost Mercer’s position in the OCIO space.

Acquiring Vanguard's business, which offers investment management services for U.S. not-for-profit organizations and institutional investors, is expected to enhance Mercer's strengths in OCIO and the management of alternative asset classes. With its global expertise, Mercer is well-poised to add value for clients with emerging investment opportunities.

The Marsh & McLennan unit operates in 130 countries with around 25,000 employees. Per the deal, around 120 members of Vanguard’s OCIO team will join Mercer as full-time workers. The transaction is slated to close in the first quarter of next year. The acquisition of the OCIO business, where clients delegate their investment portfolio management responsibility, is expected to expand Mercer’s investment capabilities.

The financial details of the deal are yet to be disclosed. The OCIO business, named Vanguard Institutional Advisory Services, has $60 billion in assets under advisement per Pensions & Investments. The acquisition is anticipated to encompass a client base exceeding 1,000, most of which are not-for-profit organizations and pension accounts.

The acquisition underscores Marsh & McLennan's strategic inorganic growth approach, exemplified by various purchases across its operating units. These acquisitions have facilitated entry into new regions, expansion in existing ones, diversification into new businesses and the development of new segments. The prudent acquisitions position the company for sustained long-term growth.

Price Performance

Shares of Marsh & McLennan have jumped 14.2% in the past year compared with the industry’s 12.7% rise.

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Zacks Investment Research

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Zacks Rank & Other Key Picks

Marsh & McLennan currently has a Zacks Rank #2 (Buy). Some other top-ranked stocks in the broader Finance space are Assurant, Inc. AIZ, Brown & Brown, Inc. BRO and Arthur J. Gallagher & Co. AJG. While Assurant sports a Zacks Rank #1 (Strong Buy) now, Brown & Brown and Arthur J. Gallagher carry a Zacks Rank #2 each. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Assurant’s current-year earnings indicates a 30.8% year-over-year increase. It beat earnings estimates in all the past four quarters, with an average surprise of 42.4%. Also, the consensus mark for AIZ’s 2023 revenues suggests 5.4% year-over-year growth.

The Zacks Consensus Estimate for Brown & Brown’s current-year earnings is pegged at $2.76 per share, which indicates 21.1% year-over-year growth. It has witnessed one upward estimate revision against none in the opposite direction during the past month. BRO beat earnings estimates in each of the past four quarters, with an average surprise of 12.3%.

The consensus mark for Arthur J. Gallagher’s current-year earnings indicates a 13.6% year-over-year increase. It beat earnings estimates in all the past four quarters, with an average surprise of 2.2%. Furthermore, the consensus estimate for AJG’s 2023 revenues suggests 18.3% year-over-year growth.

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