On a longer view, the deal raises a number of issues for the asset management (and wider financial services) market, and could have significant implications for industry participants. It continues the theme of consolidation within the asset management space.; we have already seen Henderson and Janus Capital undertake similar efforts in October and this latest announcement lends additional weight to the expectation of further consolidation in the asset management industry as participants seek to gain (or perhaps retain?) market share in a space seeing both increased competition and shrinking sources of new assets. There can be no doubt that the industry landscape will continue to change dramatically, with significant implications for both (smaller) providers and investors themselves.
An interesting additional perspective raised by some elements of the media is the extent to which the Standard Life/Aberdeen deal has been motivated by weakness, with some commentators underlining that this is a reflection of the ongoing indictment of active management practices and the pressures active providers are experiencing as passive investing continues to increase in size.
There is no doubt that active managers are under severe pressure – the FCA interim report on the asset management sector was hardly a ringing endorsement and it is unlikely its final analysis will provide much more cheer. However, it is easy to overstate these issues and while the pressure on active players will undoubtedly remain, it has long been accepted that active management retains an important place within investment portfolios. The fact that this deal combines distinct individual areas of expertise from both companies (Standard Life’s in term of distribution; Aberdeen’s in terms of product development) suggests that their agreement has been reached more from a position of strength than from one of weakness.
A final notable element of this announcement is the speed with which it was publically addressed and subsequently confirmed to the market. From the news leaking on Saturday (perhaps the worst possible time for such a thing to happen!) to confirmation early Monday morning, both parties responded quickly to the situation, going as far as to issue a joint statement confirming what was happening. It was a clear example of the benefits of having a clear, thoughtful communications plan in place and both parties should be commended for how they managed the process.
This being said and as hard as it might be to believe, this was the easy part. Both Aberdeen and Standard Life now have much work to do in explaining what their merger will mean, be the implications for its staff, clients or the wider industry, requiring a multi-layered communications approach that quickly addresses both external and internal concerns within an ongoing media spotlight.
Done well, the sentiment towards the new company will be highly positive; done badly and the business will inevitably suffer, be this in terms of share price, asset outflows or client/staff dissatisfaction. The pressure is still on.