Six months ago Martin Gilbert said it was "extremely unlikely" that Aberdeen Asset Management would buy Scottish Widows Investment Partnership (SWIP) because he was concentrating on smaller acquisitions than one with a likely £400m-£500m price tag.
Now the founder and chief executive is ready to whirl. He's got the structure of a deal – Lloyds Banking Group would be paid in Aberdeen shares with possible performance-related cash payments later. And he's calculated the effect on Aberdeen – "materially enhancing" to earnings and offering "substantial cost efficiencies."
Investors, rather than fretting about a strategic U-turn, preferred to concentrate on those financial boasts. Aberdeen's shares rose 6%. The reaction is not unreasonable. Aberdeen's market capitalisation is £5bn and the firm has assets of £205bn under management. If it can make a success of SWIP, with £160bn under management, this could be a smart deal, notwithstanding the fact that SWIP's mix of business will always imply lower fees and profit margins.
Bulls will also note that the resurgence of Aberdeen after its debacle in split capital trusts in 2002, and subsequent sale of its UK retail business in 2003, came by buying unloved asset managers from banks. The 2005 purchase of the UK and US institutional business of Deutsche Asset Management was the deal that got Gilbert back on the road. Purchases from Credit Suisse and RBS followed. Aberdeen has shown it knows how to buy from banks.
All the same Gilbert, if he beats rivals and clinches a deal with Lloyds, needs to explain Aberdeen's strategy. The acquisition would represent a mighty big charge back into the UK retail investment market, just as Aberdeen's shareholders thought they owned a business with a heavy bias towards emerging markets and one that didn't want to do big deals.
Opportunism can be a quality, of course. But it's a little too breezy to describe the possible acquisition as "consistent with the board's strategy" if you specifically ruled it out in April.
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image: © Valerie Everett