Finance

Chris Hughes is a Bloomberg Gadfly columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

Martin Gilbert has told Bloomberg TV that he wants Aberdeen Asset Management to stay independent amid what he calls "a lot of interest" from competitors wanting to buy the investment firm he founded in 1983. There have been no formal approaches, the company says, and unless one comes at a knock-out price then shareholders should welcome Gilbert's commitment to the standalone strategy. But what if a serious bid materialized? What would his incentives be?

In genuine takeover situations, company managers have one big incentive to explore a transaction for the maximum price that can be achieved: they typically have a lot of unvested stock awards that get cashed out following a change of corporate control. Plus they'll probably find a suitable job elsewhere before long.

It's not clear this logic applies so strongly in Gilbert's case. He's synonymous with Aberdeen, which has been a big part of his life for the past 33 years. No wonder he says he expects to be running the firm in five years' time.

Suppose he stays at the helm until 2021 and his pay stays at roughly the 4.3 million pounds ($6.3 million) he earned last year. Only 12 percent of this was fixed salary, the rest was variable pay. But it seems reasonable to assume that Gilbert could receive about 20 million pounds of pay and fresh stock over the period.

Assume also that the share price climbs from 275 pence to last year's high of 507.5p. That may seem punchy, but remember Aberdeen is in the doldrums now. His existing 5.2 million share awards would be worth 26.4 million pounds. In the meantime, he'd continue to be CEO -- sweat and stress no doubt, but with many compensations especially when the CEO is also the founder.

Scottish Independence
Aberdeen's share price performance between 2011 and end of 2015
Source: Bloomberg

Now imagine a bid at a near-50 percent premium from a faceless global asset manager. Gilbert's shares cash out at 410 pence per share, delivering 21.3 million pounds. The bidder might not want to keep Gilbert, and the entrepreneur might not fancy being a divisional head in an impersonal investment giant. If he left, he might get a year's pay and bonus in lieu of notice. Even putting aside his emotional attachment, the net present value of staying on and running Aberdeen looks more attractive.

Of course, the decision on whether to engage with a bidder and negotiate a transaction is for the board collectively. It's also about more than just the share price; it's about the future of the company as a whole. What's more, the situation is probably distorted by the fact that Aberdeen's shares have fallen so much. But the dynamic puts extra pressure on Chairman Roger Cornick -- a director since 2004 -- and the other non-executives. If there's a serious approach, shareholders will need them to be objective.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Chris Hughes in London at chughes89@bloomberg.net

To contact the editor responsible for this story:
James Boxell at jboxell@bloomberg.net