THE City was swift to welcome the announcement of a multi-billion-pound merger between Standard Life and Aberdeen Asset Management but, when all is said and done, what should we make of the deal from a Scottish financial sector perspective?

On Monday, when the companies confirmed they had agreed merger terms, their share prices surged, increasing their combined stock market capitalisation by nearly £600 million to almost £12 billion. The shares have since fallen back a bit.

Standard Life’s fund management operation has been a great success since it was established as an autonomous business by the life and pensions group nearly two decades ago.

The achievements and growth of Standard Life Investments (SLI) contrasted with the situation at Scottish Widows Investment Partnership, which enjoyed far less success and was ultimately acquired by Aberdeen Asset Management (Aberdeen).

The leaders of SLI, first Standard Life veteran Sandy Crombie and then Keith Skeoch, who joined from HSBC Securities, managed to achieve very significant growth in third-party funds under management, something that life and pensions offices have often struggled to do over recent decades.

Mr Skeoch’s move from being the long-time head of SLI to the post of group chief executive of Standard Life in 2015, when he replaced David Nish, highlighted just how big a part of the whole the fund management operation had by then become.

Standard Life chairman Sir Gerry Grimstone noted in June 2015 that SLI by then accounted for more than half of group profits, and was driving the internationalisation of the business.

For its part, Aberdeen’s dramatic rebound, after it was laid low in the early years of the new millennium by the split-capital investment trust crisis, has been nothing short of astounding.

The recovery task was huge, although you always got the impression that, if there was any leader who could pull a company out of such a predicament, it was Aberdeen chief executive Martin Gilbert, who had built up the investment house from pretty much a standing start.

Aberdeen was a very large player in the splits arena. Investors in a raft of split-capital trusts, managed by Aberdeen and by other investment houses, lost heavily when this sector came unstuck in the early years of the new millennium.

In the autumn of 2003, in an interview with The Herald, Mr Gilbert said of the split-capital investment trust crisis: “It has nearly finished us over the last 18 months. It is like an Exocet [missile] going into the business. It almost totally destroyed it.’’

Mr Gilbert, a keen sailor, had by this time already made crucial moves that ensured Aberdeen could be put back on an even keel, with the key action being the acquisition of Edinburgh Fund Managers. There have been many, and much larger, acquisitions by Aberdeen since but the EFM transaction still looks, as it did then, to be the one that really made the difference for the investment house amid the maelstrom.

Shrewd deal-maker Mr Gilbert agreed the acquisition of the Edinburgh investment house and the back-to-back sale of EFM’s unit trusts to New Star Asset Management. This allowed Aberdeen to acquire funds and reduce debt simultaneously.

Back in 2003, Mr Gilbert said: "The Edinburgh situation came up. It was too good an opportunity to miss.’’

Many deals later, Aberdeen’s stock market worth stood at £3.8bn last night.

Mr Gilbert and Mr Skeoch are to be co-chief executives of the merged Standard Life and Aberdeen, an arrangement that could be interesting to watch. Also of note on the personnel front, it was announced on Wednesday that David Cumming, head of equities at SLI, had decided to leave.

Standard Life, the dominant partner in the merger given its shareholders will own about two-thirds of the enlarged company, is already a fairly sizeable player in a global context. Its stock market worth was £7.5bn last night. The enlarged group formed by its merger with Aberdeen will be much bigger, looking after funds of about £660bn.

Such merger or acquisition deals are probably inevitable against a backdrop of sector consolidation and a rise of “passive” or index-tracking fund management arrangements that have put pressure on active managers’ fees.

However, fund management mergers and takeovers do have a track record of sizeable job losses as cost savings are wrung out. Standard Life and Aberdeen have signalled £200m of annual cost savings from their deal.

The closure of Ignis Asset Management’s office in Glasgow, after this operation’s takeover by Standard Life in 2014, represented a major blow to the city and its financial sector.

In the context of Glasgow, the days when the city had a raft of major fund management operations, among them Murray Johnstone, Scottish Amicable Investment Managers, Glasgow Investment Managers, and Abbey National Asset Managers, seem dim and distant indeed.

Takeovers and outsourcing of fund management activities have seen these operations disappear.

There are still some things to take heart from in Scotland’s important fund management sector, among them the great success of Edinburgh partnership Baillie Gifford and its flagship Scottish Mortgage Investment Trust.

In terms of the Standard Life and Aberdeen deal, it is some consolation from a Scottish financial sector perspective that we are not seeing one of the major home-grown businesses absorbed by an overseas player.

However, Scotland will effectively lose another independently quoted company, and a major one at that, as a result of the deal. At the end of the day, this is a matter of regret, as is the potential for major job cuts.