Recent acquisitions strengthen Morgan Stanley’s core wealth management, asset management and institutional securities businesses, Gorman argues, and open more possibilities for cross-selling.
Is Morgan Stanley Chairman and CEO Jim Gorman on a buying spree? When the global financial services firm announced its intent to purchase 94-year old asset manager Eaton Vance for approximately $7 billion in cash and stock last month, it was within days of receiving approval from the US Federal Reserve for a $13 billion all-stock acquisition of E*Trade Financial.
No, any such suspicion is unfounded, Gorman says. “We didn’t control the timing,” he said during Morgan Stanley’s third-quarter earnings call.
If regulators approve the deal, the addition of Eaton Vance’s more than $500 billion of assets under management would boost Morgan Stanley Investment Management’s AUM to more than $1.2 trillion and combined annual revenue would reach $5 billion. Morgan Stanley and Eaton Vance’s investments and distribution channels have limited overlap. The venerable mutual fund manager would bring separately managed accounts, custom investment offerings and a portfolio of environmental, social and governance (ESG) investing strategies through its Parametric and Calvert business lines, respectively, Gorman noted.
E*Trade Financial adds more than 5.2 million client accounts with more than $360 billion in assets to Morgan Stanley’s 3 million client relationships and $2.7 trillion of assets. The deal would also increase Morgan Stanley’s wealth management footprint, fill gaps in its product and service portfolio and enhance its digital offerings.
The acquisitions strengthen Morgan Stanley’s core wealth management, asset management and institutional securities businesses, Gorman argues, and open more possibilities for cross-selling.
Some industry analysts find plenty to like in the two acquisitions. “We estimate that the contribution from Eaton Vance should boost return on average tangible common shareholders’ equity by more than 100 basis points, which supports a ‘fully-synergized’ ROTCE of more than 16.5% by 2023,” wrote the authors of a research note from boutique analysis firm Wolfe Research. “The growing contribution from Wealth & Investment Management, approximately 60% of revenue, should drive the multiple higher as well.”