Marsh, a unit of Marsh & McLennan Companies (MMC), was the world's leading risk management consulting and insurance brokerage services firm, with 26,000 employees, annual revenues of $4.5 billion, and operations in over 100 countries. The NOI of Marsh for 2006 was 10%; significantly below the industry average NOI margin of 16%. A smaller competitor (Willis) has expressed indications of interest to purchase Marsh and merge it into its own business and infrastructure.
Marsh wanted to take steps to improve its NOI margin and its enterprise value within MMC. From September 2006 to January 2007, Zolfo Cooper assisted Marsh’s management team in the identification and oversight of over 56 profit and process improvement initiatives around the world to be executed through 2008.
Over $300 million in cost reductions (7.4% of total costs) were identified to be implemented through 2008, resulting in no reductions in revenue. Zolfo Cooper implemented project management and tracking solutions to help monitor execution of the initiatives.
The Zolfo Cooper team identified headcount reductions of 4.3% and 8.1% in the US and Europe, respectively. The headcount reductions were focused on the higher paid employees and decreased average compensation from $103.7K to $98.5K in the US and $101.6K to $98.2K in Europe. In addition, newly established governance processes held the managers of the individual businesses within Marsh more accountable.
In part as a result of the cost reductions at Marsh, along with the announcement to explore options to sell Putnam and execute cost reductions at MMC, the MMC stock price rose from $26 in August 2006 to over $30 by the end of the year.