Excerpt from RBC Capital Markets Corp. "Insurance Observations"
Aon scores a game winner
Week of June 8, 2009
Volume 9, Issue 23
Aon made a significant splash in the worldwide sports world last week by signing a four-year deal to become the sponsor for the Manchester United soccer team beginning in the 2010-2011 season, replacing AIG in this role which elected not to renew its contract. Without question, this is a huge deal for Aon on every level. The previous four-year deal with AIG was pegged at $93 million, giving an indication that this is no small commitment for Aon and is a statement to us on how management views the importance of expanding its global reach. Although an official number hasn’t been disclosed or confirmed, The Wall Street Journal has estimated Aon’s four-year deal at £80 million (approximately $130 million). Aon is only the fourth company ever to sponsor the coveted ManU franchise.
The Manchester United brand is arguably the most powerful sports brand in the world with the team claiming to have more than 300 million fans across the globe. An estimated 220 countries have access to the MANU-TV channel and reportedly 70% of the monthly hits to its website come from outside the UK. Interestingly, there are reportedly more than six times the ManU fans in India compared to the UK, showing just how popular the team is throughout the world. This was probably a key reason for doing the deal as India and Europe are two territories where Aon has been active in making acquisitions and opening new offices during recent years.
Aon already conducts business in over 120 countries and this is certainly a way to get their branding message out to both mature and emerging market growth areas of the world. With the acquisition of Benfield, we estimate that approximately 60%-65% of Aon’s revenue now comes outside of the United States while its presence in Europe is now dominant. Regardless of the price for this arrangement, Aon certainly has the balance sheet to do this deal without a problem (Aon had $1.4 billion in cash and short-term investments at the end of 1Q09).
Aon already conducts business in over 120 countries and this is certainly a way to get their branding message out to both mature and emerging market growth areas of the world. With the acquisition of Benfield, we estimate that approximately 60%-65% of Aon’s revenue now comes outside of the United States while its presence in Europe is now dominant. Regardless of the price for this arrangement, Aon certainly has the balance sheet to do this deal without a problem (Aon had $1.4 billion in cash and short-term investments at the end of 1Q09).
From our perspective, the real test will be how much incremental revenue growth could be boosted through this form of advertising. It is always difficult to measure returns on marketing investments but it is clear that few other franchises offer this kind of bang for your buck across so many countries (which we think is the goal for Aon). If Willis’ decision to have the Sears Tower renamed Willis Tower could be topped, this might just do it.
