Acquisitions

During the first nine months of 2012, the Company made seven acquisitions in its Risk and Insurance Services segment and three in its Consulting segment. In January 2012, Marsh acquired Alexander Forbes' South African brokerage operations, including Alexander Forbes Risk Services and related ancillary operations and insurance broking operations in Botswana and Namibia. In March 2012, Marsh acquired KSPH, LLC, a middle-market employee benefits agency based in Virginia, and Cosmos Services (America) Inc., the U.S. insurance brokerage subsidiary of ITOCHU Corp., which specializes in commercial property/casualty, personal lines, and employee benefits brokerage services to U.S. subsidiaries of Japanese companies. In February 2012, Mercer acquired the remaining 49% of Yokogawa-ORC, a global mobility firm based in Japan, which was previously accounted for under the equity method, and Pensjon & Finans, a leading Norway-based financial investment and pension consulting firm. In March 2012, Mercer acquired REPCA, a France-based broking and advisory firm for employer health and benefits plans. In June 2012, Marsh acquired Progressive Benefits Solutions, an employee benefits agency based in North Carolina, and Security Insurance Services, Inc., a Wisconsin-based insurance agency which offers property/casualty and employee benefits products and services to individuals and businesses. In August 2012 Marsh acquired Rosenfeld-Einstein, a South Carolina-based employee benefits service provider, and Eidson Insurance, a property/casualty and employee benefits services firm located in Florida.

Total purchase consideration for acquisitions made during the nine months of 2012 was $205 million, which consisted of cash paid of $124 million, deferred purchase and estimated contingent consideration of $19 million, and cash held in escrow of $62 million at December 31, 2011 that was released in the first quarter of 2012. Contingent consideration arrangements are primarily based on EBITDA and revenue targets over two to four years. The fair value of the contingent consideration was based on projected revenue and earnings of the acquired entities. Estimated fair values of assets acquired and liabilities assumed are subject to adjustment when purchase accounting is finalized. During the nine-months ended September 30, 2012, the Company also paid $51 million of deferred purchase consideration and $20 million of contingent consideration related to acquisitions made in prior years.

The following table presents the preliminary allocation of the acquisition cost to the assets acquired and liabilities assumed, based on their fair values:



For the Nine Months Ended September 30,
(Amounts in millions)	2012
Cash (includes $62 million held in escrow at 12/31/11)	$	186
Estimated fair value of deferred/contingent consideration	19
Total Consideration	$	205
Allocation of purchase price:
Cash and cash equivalents	$	22
Accounts receivable, net	5
Property, plant, and equipment	3
Intangible assets	96
Goodwill	126
Other assets	3
Total assets acquired	255
Current liabilities	11
Other liabilities	39
Total liabilities assumed	50
Net assets acquired	$	205

Prior Year Acquisitions

During 2011, the Company made seven acquisitions in its Risk and Insurance Services segment and five in its Consulting segment. In January 2011, Marsh acquired RJF Agencies, Inc., an independent insurance broking firm in the Midwest. In February 2011, Marsh acquired Hampton Roads Bonding, a surety bonding agency for commercial, road, utility, maritime and government contractors in the state of Virginia, and the Boston office of Kinloch Consulting Group, Inc. In July 2011, Marsh acquired Prescott Pailet Benefits, an employee benefits broker in the state of Texas. In October 2011, Marsh acquired the employee benefits division of Kaeding, Ernst & Co, a Massachusetts-based employee benefits, life insurance and financial planning consulting firm. In November 2011, Marsh acquired Gallagher & Associates, Inc., a property and casualty insurance agency based in Minnesota. In November 2011, Marsh acquired Seitlin Insurance, an insurance firm based in South Florida. These acquisitions were made to expand Marsh's share in the middle-market through Marsh & McLennan Agency.

In January 2011, Mercer acquired Hammond Associates, an investment consulting company for endowments and foundations in the U.S. In June 2011, Mercer acquired Evaluation Associates LLC, an investment consulting firm. In July 2011, Mercer acquired Mahoney Associates, a health and benefits advisory firm based in South Florida. In August 2011, Mercer acquired Censeo Corporation, a human resource consulting firm based in Florida. In December 2011, Mercer acquired Alicia Smith & Associates, a Medicaid policy consulting firm based in Washington, D.C.

Total purchase consideration for acquisitions made during the first nine months of 2011 was $132 million which consisted of cash paid of $116 million and estimated contingent consideration of $16 million. Contingent consideration arrangements are primarily based on EBITDA and revenue targets over two to four years. The fair value of the contingent consideration was based on earnings projections of the acquired entities. Estimated fair values of assets acquired and liabilities assumed are subject to adjustment when purchase accounting is finalized. During the first nine-months of 2011, the Company also paid $19 million of deferred purchase consideration related to acquisitions made in prior years. In addition, the Company paid $2 million to purchase other intangible assets during the first nine months of 2011.

In the second quarter of 2011, Marsh purchased the remaining minority interest of a previously majority owned entity for total purchase consideration of $8 million and accounted for this acquisition under the guidance for consolidations and non-controlling interests. This guidance requires that changes in a parent's ownership interest while retaining financial controlling interest in a subsidiary be accounted for as an equity transaction. Stepping up the acquired assets to fair value or the recording of goodwill is not permitted. Therefore, the Company recorded a decrease to additional paid in capital in 2011 of $2 million related to this transaction.

In the first quarter of 2011, the Company also paid deferred purchase consideration of $13 million related to the purchase in 2009 of the minority interest of a previously controlled entity.

Pending Acquisitions

Subsequent to September 30, 2012, Marsh made two additional acquisitions for an aggregate purchase price of approximately $60 million and given the timing of these transactions, the initial accounting for the business combinations is not yet complete.

Pro-Forma Information

While the Company does not believe its acquisitions are material in the aggregate, the following unaudited pro-forma financial data gives effect to the acquisitions made by the Company during 2012 and 2011. In accordance with accounting guidance related to pro-forma disclosures, the information presented for current year acquisitions is as if they occurred on January 1, 2011. The pro-forma information adjusts for the effects of amortization of acquired intangibles. The unaudited pro-forma financial data is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been achieved if such acquisitions had occurred on the dates indicated, nor is it necessarily indicative of future consolidated results.



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions, except per share data)	2012		2011		2012		2011
Revenue	$	2,848	$	2,850	$	8,946	$	8,762
Income from continuing operations	$	247	$	133	$	943	$	738
Net income attributable to the Company	$	242	$	130	$	921	$	737
Basic net income per share:
– Continuing operations	$	0.44	$	0.24	$	1.69	$	1.32
– Net income attributable to the Company	$	0.44	$	0.24	$	1.69	$	1.35
Diluted net income per share:
– Continuing operations	$	0.44	$	0.23	$	1.67	$	1.30
– Net income attributable to the Company	$	0.44	$	0.24	$	1.66	$	1.33

The Consolidated Statements of Income for the three and nine months ended September 30, 2012 include approximately $31 million of revenue and $6 million of net operating income and approximately $76 million of revenue and $15 million of net operating income, respectively, related to acquisitions made during 2012