Standard Life and Aberdeen Asset Management agree merger terms: what fund holders need to know
If the deal goes through, it will create one of the largest active fund management firms in the world, running £660bn, with clients in 80 countries.
Under the terms of the deal, Standard Life shareholders would own two thirds of the combined company and Aberdeen investors the remaining third.
The deal is subject to shareholder approval. If obtained, the merger is expected to happen in the third quarter of 2017.
The new company will be rebranded in due course to incorporate the names of both Standard Life and Aberdeen.
The firms expect annual cost savings of around £200m within three years of the merger taking place.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “This merger is a marriage of the old and the new, both in terms of the companies’ heritage and their main areas of strength.
“In particular, Aberdeen’s emerging markets focus dovetails well with Standard Life’s capabilities in developed markets, though there are considerable areas of overlap between the two fund groups, particularly in multi-asset, fixed income and property strategies.
“Standard Life brings some stability to the table for Aberdeen, which has seen 15 quarters of consecutive outflows, and which will also now benefit from distribution through Standard Life’s workplace pension and wrap platform. Aberdeen meanwhile offers Standard Life a quick route to the big boy’s table by almost doubling assets under management.”
Active managers are feeling the pressure when it comes to fund charges, thanks to an increased regulatory focus on costs and the growth in popularity of cheaper, passive products.
Jason Hollands, managing director at Tilney Bestinvest, said: “The recent mega-consolidation deals within the asset management industry are, I believe, a tacit acknowledgment of these headwinds.”
Advice for fund holders
Hollands said the deal will have both advantages and disadvantages.
On the plus side, he points to greater efficiencies and competitive advantage in sales, marketing and brand recognition.
The downside however is that for some strategies and asset classes, scale is not always beneficial in delivering outperformance.
“Scale can inhibit the ability to move assets swiftly in a fund and seal off the ability to invest in less liquid securities,” he said. “So as this merger moves from a transaction to the integration phase, clients and advisers will want to see what it means for individual products and teams.”
Investors who have money in Standard Life and Aberdeen funds are advised not to make any knee jerk action.
“Firstly, the deal is not done, it is a recommended transaction,” said Hollands.
“Assuming shareholders and the regulators approve it, it will likely take some months to complete and then, once that has happened, the integration will begin.
“Any proposals for fund mergers would likely require votes, so will be well flagged.”