Clean slate

Merged as­set man­ager has chance to re­vive M&A af­ter Skeoch’s de­par­ture, writes Michael O’Dwyer

The Daily Telegraph - Business - - Front Page - Michael O’Dwyer

De­par­ture of chief be­hind Stan­dard Life Aberdeen merger will al­low as­set man­ager to get on with job

Stan­dard Life Aberdeen (SLA) boss Keith Skeoch is to step down three years af­ter spear­head­ing the £11bn merger that trans­formed two mid-tier as­set man­agers into a fi­nan­cial ser­vices ti­tan. The exit of Skeoch, who led Stan­dard Life In­vest­ments into the com­bi­na­tion, means nei­ther of the deal’s ar­chi­tects re­main at the as­set man­ager.

Mar­tin Gil­bert, the former boss of Aberdeen As­set Man­age­ment, with whom Skeoch plot­ted the tie-up over burg­ers and fries at an Ed­in­burgh ho­tel, has al­ready de­parted af­ter an un­easy spell when the pair were co-chief ex­ec­u­tives.

The un­ortho­dox ar­range­ment was wildly un­pop­u­lar. “Ev­ery­body hated it ex­ter­nally,” ad­mits a source close to the firm. The merger, which was in­tended to pro­pel SLA into as­set man­age­ment’s $1 tril­lion club, has fallen far short of that aim. “You have to be very char­i­ta­ble to say it’s gone well,” says David McCann, of Nu­mis.

SLA now man­ages £490bn and has been hit by out­flows in­clud­ing the loss of a £109bn man­date from Lloyds Bank­ing Group’s Scot­tish Wid­ows. It also sold its life in­sur­ance busi­ness to Phoenix Group, a di­vi­sion that could have off­set the im­pact of the strug­gles in its as­set man­age­ment wing.

Shares are worth around half of what they were when the deal com­pleted in Au­gust 2017, though in­vestors have ben­e­fited from share buy­backs.

“The share price is al­ways right,” says Sir Dou­glas Flint, chair­man of Stan­dard Life Aberdeen. “If you say it doesn’t re­flect the suc­cess of what you’re do­ing then ei­ther you haven’t ar­tic­u­lated the suc­cess well enough so that peo­ple un­der­stand it, or you’re kid­ding your­self.”

He thinks it will be five or 10 years be­fore the mer­its of the merger can be prop­erly as­sessed but un­der­stands in­vestors’ im­pa­tience. “I al­ways think mar­kets can see the op­por­tu­nity, but they start to give you credit when they ac­tu­ally see the ac­tu­al­ity as op­posed to the ar­tic­u­la­tion of a vi­sion.” Flint, the former chair­man of HSBC who joined SLA af­ter the merger, says both Skeoch and Gil­bert have been “ex­tra­or­di­nary ser­vants” of the busi­ness but that the Covid cri­sis ac­cel­er­ated the search for a suc­ces­sor to Skeoch.

The new chief, Stephen Bird, joins to­day and, sub­ject to reg­u­la­tory ap­proval, will take over later this year. Once he takes the hot seat, Skeoch will serve his no­tice pe­riod at the group’s in­ter­nal think tank.

Bird, a Scot, comes with top class bank­ing pedi­gree. He led Cit­i­group’s global re­tail bank­ing di­vi­sion un­til last year and was linked with the chief ex­ec­u­tive role at HSBC. Flint says the pair had met at bank­ing con­fer­ences over the years.

There was an el­e­ment of serendip­ity in his ap­point­ment as he had moved back to Ed­in­burgh fol­low­ing his de­par­ture from Citi. The time elapsed since his de­par­ture from the bank means SLA avoids hav­ing to com­pen­sate him for bonuses he might oth­er­wise have missed out on.

Bird has no as­set man­age­ment ex­pe­ri­ence, which caused cer­tain an­a­lysts to raise an eye­brow, but some in­vestors are en­thused by his ar­rival. Shares bounced more than 3pc af­ter the an­nounce­ment yes­ter­day morn­ing, al­though slipped back later in the day.

Beren­berg an­a­lysts say Skeoch’s exit means “se­nior po­si­tions are filled by peo­ple not associated with the un­pop­u­lar merger … so could make it eas­ier for the com­pany to pur­sue big M&A deals again”.

“Never rule any­thing out,” says Flint, be­fore adding that SLA has plenty of op­por­tu­ni­ties to grow al­ready. Bird’s ar­rival marks a new chap­ter but frames the han­dover as a “nat­u­ral evo­lu­tion” rather than a more dras­tic shake-up.

Across the mar­ket, as­set man­agers have been bulk­ing up in an ef­fort to im­prove their ef­fi­ciency but SLA is still far short of the scale needed to com­pete glob­ally. As­sets tied up on the firm’s bal­ance sheet could be used to fund a ma­jor ac­qui­si­tion. An­other pos­si­bil­ity is find­ing a larger US suitor to take over SLA.

Ei­ther way, in­vestors will ex­pect per­for­mance to im­prove.

“It can’t re­ally con­tinue like it is in­def­i­nitely,” says McCann. “It is in des­per­ate need of sta­bil­i­sa­tion.”

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