Martin Flanagan: Holyrood relaxed over Standard-AAM deal
Those who wondered if the costcutting-and'‘complementarity cocktail of logic for the merger of Standard Life and Aberdeen Asset Management (AAM) would be trumped by populist Holyrood politics may be disappointed.
The Scottish Government’s initial response to the merger confirmation yesterday was quite positive, calling the deal a potential vote of confidence in Scotland’s financial centre.
Holyrood says it will talk to the two financial majors about their plans for employment and investment north of the Border. But the language was measured and does not suggest the Government would have any red line about degrees of job losses that may be involved amid overlapping operations between AAM and Standard Life.
The companies have seemingly tackled one issue upfront by saying the merged company will have its HQ in Scotland. But, interestingly, how watertight would that commitment be if a second Indyref delivered a Yes vote, with so many of both groups’ customers south of the Border?
The geographical and business dovetailing of the deal looks plausible. Aberdeen has been arguably over‑focused on emerging markets, primarily Asia, for some time, creating much volatility in its business performance.
Having Standard Life’s strong UK footprint, and its strong pensions and life business as predictable ballast to its more variable fund management activities, may look a shrewd disemmination of risk by Martin Gilbert’s AAM.
Similarly, Keith Skeoch at Standard Life, due to share a curious dual chief executive role with Gilbert at the combined company, will see those Asian and emerging market assets as very complementary to his group’s fixed interest and UK asset base over a longer timespan.
In short, a racier, deal-driven Aberdeen is shacking up with a more safe, predictable – but innovative – Standard Life. As experts have pointed out, fund management is increasingly a big-is-beautiful affair to squeeze boutique and mid-size operators, costcutting and procurement clout giving the majors a distinct edge.
This deal acknowledges that, and Holyrood – as of now – appears relaxed about it.