Pressure on Standard Life merger partners to avoid an own goal
Co-chiefs Keith Skeoch and Martin Gilbert share similarities — which is a concern
Would Keith Skeoch, low-key chief executive of Standard Life, have headed from the bar at Davos to Donald Trump’s inauguration? Does he base his management style on that of football supremo and Glaswegian verbal hairdryer Sir Alex Ferguson? Could he have been likened to a “snake oil salesman” by MPs in a probe into split capital investment trusts, and emerged unscathed?
Standard Life’s shareholders might ask themselves such questions given Mr Skeoch’s choice of merger partner. Martin Gilbert, flamboyant co-founder of Aberdeen Asset Management and co-CEO designate of their combined £11bn business, is known for all the above. He appears a very different character to Mr Skeoch. Mr Gilbert has proved the consummate deal consummator. This is his 43rd merger or acquisition in a three-decade career as Aberdeen’s dominant leader, to whom no obvious successor has emerged.
Mr Skeoch, by contrast, is an economist by training, who first opted for a Whitehall job before spending 20 years at conservative London stock broker James Capel.
The two men insist these differences will make being co-CEOs work. On Monday they stressed that being “very different people” who have known — and fly-fished alongside — each other “for a long time” was “why we get on”. Opposites attract, it seems (to which comedian John Cleese once countered: “Ah, the cry of the truly desperate.”)
However, it is not the duo’s differences but their similarities that worry some. The pragmatic Mr Gilbert does what it takes to get deals done, swapping the banks of the Tay for a flat above a Thameside pizza joint when working his contacts in the City.
Mr Skeoch is no less steely — in his role running Standard Life’s investment arm, he began being paid more than, and ended up usurping, group chief executive David Nish.
Could such forceful personalities share the CEO role?
Mr Gilbert should know it doesn’t work in football. At Manchester United, his friend Sir Alex watched rivals Liverpool fall apart when they played under joint managers Roy Evans and Gerard Houllier.
It seldom works in financial services, either. At Citigroup, co-CEOs Sandy Weill and John Reed clashed so often between 1998 to 2000 that Wharton business school uses them as a case study of why “strong people with strong views” should not jointly run companies. CEOs of Fortune 500 businesses in the US rarely share power.
Closer to home — and closer to the bone — one analyst recalls “the ‘Richard & Roger’ show”, when co-CEOs Richard Gamble and Roger Taylor tried ineffectually to integrate Royal Insurance and Sun Alliance.
Single mindedness is all when merging insurance and investment houses. For Standard Life’s shareholders — and regulators — the key question may be whose single mind.
BT’s costly defence play
Footie fans pay almost any price to watch their teams play. At least BT, whose boss Gavin Patterson is a diehard Liverpool supporter, must hope so. The telecoms-to-TV group is paying a whopping £1.2bn for the rights for three years to broadcast European Champions League football to UK audiences, writes Kate Burgess. That is a third up on the price it coughed up to win the rights from rivals Sky and ITV in 2013. What price will Mr P pay next time round?
In BT’s defence, sport underpins the group’s broadband and pay-TV business, luring in and holding subscribers. Before BT Sport, the group was losing 200,000 customer lines per quarter. BT would come a poor second to Sky if all it could offer subscribers was thin coverage of Premier League matches. It is not so much what BT has won but what it would have lost if Sky had won the Uefa rights.
BT can in part justify the price, saying the new Uefa package has improved. And it will be able to offset some of the cash cost by charging for sport. It also has access to EE’s mobile customers.
But Bernstein analysts reckon BT Sport is barely profitable on a standalone basis. And the Uefa package hasn’t improved so much it can guarantee the millions of viewers who will watch a match between, say, Man Utd and Liverpool. BT might have been wiser to hold on to the cash and use it next year to secure the rights to Premier League matches. Other parts of the business will need cash, too. Last month the group warned on profits from its global services division, having found the jiggery pokery in its Italian operations was worse than expected. A massive hole in its pension fund looms over BT, as does its continuing tussle with Ofcom over Openreach.
Securing the rights to show Uefa games is central to Mr Patterson’s plan to turn BT into a “quadplay” provider of TV, telephony and broadband. The worry is that those who believe BT is overpaying are but a penalty kick away from losing faith in Mr Patterson and his strategy.