Despite the announcement last week that takeover talks between Jardine Lloyd Thompson Group plc (JLT) and Heath Lambert Group had ended, it's still conceivable that neither firm will be independent in a year's time as brokers find the search for growth tough going in the post-Spitzer landscape.
Shares in JLT fell 13 percent last week to close at 347.25p as investors reacted badly to the news. At time of writing, the share price had slipped a further 2.95 percent to 337p. The scale of the fall indicates the enthusiasm analysts had for the possible tie-up which would have seen the creation of the UK's second largest broker by turnover and the possibility of some exacting cost-savings. Morgan Stanley, for instance, had predicted that with the loss of 400 jobs, the deal could have increased JLT's earnings per share by up to 25 percent.
But a lowly share price also increases the possibility of a predator deciding to pounce. This is not what new chief executive Dominic Burke wants and his promotion in December to replace the interim head Ken Carter means he has enjoyed the support of the group's largest shareholder, Jardine Matheson. But everyone has their price.
For Heath Lambert's shareholders - principally Royal Bank of Scotland and Credit Suisse, together with the management - it would appear to be around £130mn; the price provisionally agreed with JLT before talks ended.
The two firms most likely to consider either JLT or Heath Lambert would be Aon Ltd or Willis Group. The latter passed their rule over Heath Lambert earlier this year and its management is thought to be mulling the possibility of a significant acquisition. This would drop some significant revenues into the New York-listed firm's profit and loss account and, as is often the case with broker consolidation, should also leave room for healthy cost-savings. It would provide a tremendous opportunity for Grahame Millwater, newly appointed to the Office of Chairman and possible heir to chief executive Joe Plumeri's throne, to prove his mettle to Willis shareholders by successfully integrating a newly acquired company.
While for Aon Ltd, the decision would rest on the thoughts of Dennis Mahoney, its long-serving chief executive whose status within the firm was enshrined with the news last week that his contract has been extended to 2015.
In a statement, Heath Lambert CEO Adrian Colosso said talks ended because of integration difficulties.
"We began discussions with the aim of combining our increasingly successful business model with the additional resources of JLT," he noted, adding. "As discussions progressed we became less confident that we would be able to continue with this model and therefore less confident of achieving the objective. Proceeding would not have been in the best interests of our staff or our clients."
In an announcement to the London Stock Exchange, JLT simply said it wishes to "advise that the preliminary discussions between JLT and Heath Lambert regarding a potential bid by JLT for Heath Lambert have now been terminated".