Towers Watson is to merge with rival Willis in an $18bn (€16.2bn) deal to create a 40,000-strong consultancy business.

The companies said the transaction would be a “merger of equals”, with current Willis shareholders owning 50.1% of the new company and Towers Watson the remaining 49.9%.

The merger will see further consolidation within the pension consultancy market, which already saw Towers Perrin and Watson Wyatt merge in early 2010 to create Towers Watson.

John Haley, chairman and chief executive of Towers Watson and previously chief executive of Watson Wyatt, said the move was a “tremendous combination” that would see two firms with complementary strategies coming together.

Haley added that current risk advisory and insurance-brokering services would be combined to offer “a more robust set of analytics”.

But he also signalled that the creation of the new entity – Willis Towers Watson – could see redundancies.

In a statement, he said: “We also expect to realise substantial efficiencies by bringing our two organisations together, and have a well-defined integration roadmap to capitalise on identified savings, ensure the strongest combination of talent and practices, and realise the full benefits of the merger for all of our stakeholders.”

Towers Watson shareholders will receive 2.64 Willis shares in exchange for their stake, with an additional one-off dividend payment of $4.87 pre-closing.

A similar deal will also be offered to Willis stakeholders, and the final agreement will then see one share in Willis Towers Watson for each Towers Watson share.

Haley will become chief executive of the new company, and Willis chief executive Dominic Casserley will be named president and deputy chief executive.

The companies expect to finalise the deal by the end of the year, subject to shareholder and regulatory approval.

For more on the European pension consulting market, see IPE’s recent special report