On Friday, Marsh & McLennan Companies, Inc.’s (MMC) Marsh & McLennan Agency LLC (:MMA) announced the acquisition of Minnesota-based Liscomb Hood Mason Co., in order to expand its employee benefits coverage. However, the terms and financials of the deal remain concealed. MMA is a subsidiary of Marsh & McLennan’s leading insurance brokerage wing – Marsh Inc.
Armed with $2.2 million in annual revenue, Liscomb Hood Mason has been offering a wide-range of property-casualty and employee benefit products and services in the region since 1927. Meanwhile, the acquisition will help Marsh & McLennan penetrate deeper into the upper Mid-west region of the U.S.
Last month, the company also acquired Ohio-based Brower Insurance Agency and the employee division of Dallas-based Independent Insurance Group, which further reflects Marsh & McLennan’s focus on this regional expansion. The latest acquisition is another attempt by Marsh & McLennan to maximize its manpower resources in order to expand its clientele.
Marsh & McLennan’s MMA has been following the strategy of growth through acquisitions, over the last couple of years. This strategy has not only helped the company grow inorganically but is also showing positive results on the financials. Following the acquisition of Liscomb Hood Mason, MMA acquired about 26 firms since November 2009. This broad band of acquisitions also strengthens Marsh & McLennan’s position as a dominant player in its industry, closer to the leading Aon Corp. (AON).
Moreover, despite the acquisition-related costs, Marsh & McLennan posted impressive results in the first nine months of 2012 on account of top-line growth in all lines of businesses, lower operating expenses and higher investment income. Even the unutilized $1.0 billion revolving credit facility along with expected tax benefits in the upcoming quarters shall provide cushion to the company’s liquidity, thereby eliminating any significant risk from the company’s financial leverage.
Overall, as a leading global broker, Marsh & McLennan has a history of outperforming its peers banking on its size, diverse product offering, global presence and technical expertise. We believe that the company has the ability to remain focused on this growth approach with a prudent management, thereby driving the earnings in the future as well.
Currently, Marsh & McLennan carries a long-term Neutral recommendation and a Zacks #3 Rank (Hold) in the short term.
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