The proposed £11bn mega-merger of Standard Life and Aberdeen Asset Management is a defensive move to fight back against an increasingly challenging market backdrop, City analysts warned, as the pair unveiled full terms of the deal.

Investors appeared to warm to the union, which will create the UK’s largest fund manager with £660bn of assets under management, with shares in the companies rising by more than 5pc each.

But analysts warned that both companies are under intense pressure amid increased regulation in the asset management industry and competition from passive funds, which operate with a much lower cost base.