Behind the Merger: A look at Standard Life Aberdeen

Asset management companies have been grappling with investors’ increasing preference for passive funds, which are less costly. On March 6, 2017, in a move shaking up Scotland’s financial services sector, Standard Life Plc. and Aberdeen Asset Management Plc. created the second-largest fund manager in Europe with an 11 billion pound ($14.7 billion) merger.

The companies estimated the move would realize about £200 million pounds in cost savings within three years. Operating under the name Standard Life Aberdeen (ABDN), the newly created entity had £670 billion ($871 billion) under management following the merger, which was completed on Aug. 14, 2017.

Key Takeaways

  • On March 6, 2017, Standard Life Plc. and Aberdeen Asset Management Plc., two Scottish companies, announced they were merging to form Standard Life Aberdeen.
  • Standard Life shareholders held 66.7% of the new company; the remaining amount went to Aberdeen stockholders.
  • The new company had £670 billion ($871 billion) under management following the merger, completed on Aug. 14, 2017.
  • The move put Standard Life Aberdeen in competition with other major asset managers, including behemoths like BlackRock (BLK) and The Vanguard Group.
  • Since the merger, Standard Life Aberdeen has gained a new CEO, sold off Standard Life Assurance, and changed its name to ABRDN.

A Smooth Merger

Aberdeen Asset Management and Standard Life first began to have serious talks in January 2017 about combining their operations. Behind the scenes, the process seemed to go smoothly. Then-Aberdeen CEO Martin Gilbert said despite the company’s flailing finances, he felt no pressure, either from shareholders or from the company’s finances, to join with Standard Life.

“We didn’t have to do the deal. We have no debt and 500 million pounds of cash,” Gilbert said in a call with reporters, according to Bloomberg.“Let me be absolutely clear — we had a very good future if we wanted as an independent company."

But for Aberdeen, the merger did provide some relief from its struggling operations. It had frozen salaries and was reportedly mulling scaling back dividends to cut costs. Standard Life, which was nearly twice as valuable as Aberdeen, offered stability.

The merger gave Standard Life shareholders 66.7% of the new company. Aberdeen shareholders, who would hold 33.3%, received 0.757% of a share of the new company for each share of Aberdeen they held. That arrangement was in line with each company’s market value before the merger discussions were disclosed in March.

Joint Management

Both Gilbert and Standard Life CEO Keith Skeoch originally led the new combined company, combing through the company's operations to improve efficiency. "A lot of people have questioned the wisdom of this relationship between these two very big personalities but it is actually very sensible to involve both in the integration of these two substantial businesses,” Liberum bank analyst Justin Bates told Financial Times.

Both have since departed the business. Stephen Bird, formerly of Citigroup, has been acting as CEO since July 2020.

On July 5, 2021, Standard Life Aberdeen officially changed its name to ABRDN plc (pronounced "aberdeen"). It had sold Standard Life Assurance to the Phoenix Group in 2018.

Shareholder and Analyst Approval

In a joint statement, the companies said the takeover had the support of Aberdeen shareholders. Among them, Mitsubishi UFJ Financial Group Inc. had a 17%t stake in Aberdeen, making it its largest shareholder. Lloyds Bank Group Plc, with a 10% stake and the third-largest stake in Aberdeen, was also in favor of the merger, the companies said.

Analysts expressed generally positive sentiment on the merged company. Citigroup analysts said the new company provides “better growth” than Standard Life would alone. The firm also thought that the combined company will have “better strategic positioning” than Aberdeen Asset would alone. “We see upside driven by cost synergies,” analysts wrote in a note to clients.

But the merger would require layoffs, predicted some analysts and newspapers like The Telegraph. When they combined, Standard Life employed about 8,335 people and Aberdeen employed 2,800. As of 2021, the merged firm has over 5,000 employees.

Aberdeen had previously considered other options for a merger, including a bid for Pioneer Global Asset Management. When it declined that deal, analysts began to suspect another option was on the table.

The Bottom Line

 When the merger was announced in March, stocks of both companies rallied on the London exchange. Standard Life Aberdeen began competing with other major asset managers, including behemoths like BlackRock (BLK) and The Vanguard Group.

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