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Morgan Stanley (MS) Closes Buyout of Eaton Vance, Boosts AUM

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Zacks Equity Research
·4 min read
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Morgan Stanley MS completed the acquisition of the Boston, MA-based Eaton Vance. The stock-cash deal, announced in October 2020, will position Morgan Stanley as a leader in the Wealth Management industry across all channels and segments, with significant increase in the scale and breadth of its franchise.

Now, Morgan Stanley Investment Management (“MSIM”) will have $1.2 trillion of assets under management (“AUM”) and more than $5 billion of combined revenues.

Notably, the acquisition will support Morgan Stanley’s strategic transformation with three world-class businesses of scale, including Institutional Securities, Wealth Management and Investment Management.

Morgan Stanley’s chairman and CEO, James P. Gorman, stated, “This acquisition further advances our strategic transformation by continuing to add more fee-based revenues to complement our world-class, integrated investment bank.”

He added, “With the addition of Eaton Vance, Morgan Stanley will oversee $5.4 trillion of client assets across its Wealth Management and Investment Management segments. The Morgan Stanley Investment Management and Eaton Vance businesses are delivering strong growth and their complementary investment and distribution capabilities will deliver significant incremental value to our investment management clients.”

Notably, the chairman and CEO of Eaton Vance, Thomas E. Faust, Jr., will now become the chairman of MSIM.

Deal Consideration & Benefits

Eaton Vance shareholders have been offered 0.5833 of Morgan Stanley’s shares for each of their own shares held and $28.25 per share in cash.

At the time of deal announcement, it was decided that Eaton Vance shareholders will get the option to choose for all cash or all stock, subject to a proration and adjustment mechanism.

Per the terms of the deal, shareholders of Eaton Vance have also received a one-time special cash dividend of $4.25 per share.

At the time of announcement of the deal, both firms were projecting long-term financial benefits, attractive for shareholders. The transaction is expected to help Morgan Stanley generate stellar financial returns through increased scale, improved distribution, cost savings of $150 million and Eaton Vance expense and revenue opportunities.

Moreover, it was projected that the transaction would result in a break-even to earnings per share immediately. Also, it is likely to be marginally accretive to earnings, with fully phased-in cost synergies.

Our Take

Over the past few years, Morgan Stanley has been undertaking initiatives to restructure operations, with a goal to increase reliable revenue sources. Hence, the company is focusing on segments like Wealth Management and Investment Management as these are less dependent on capital markets. The company’s strategic expansion efforts — including the acquisitions of E*Trade Financial and Shareworks — are noteworthy in this direction.

Over the past six months, shares of the company have gained 50.1% compared with 55.2% growth recorded by the industry.






Currently, Morgan Stanley carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Of late, the asset management industry is undergoing significant consolidation. This January, BlackRock BLK closed the acquisition of investment management services provider, Aperio Group LLC, from Golden Gate Capital and Aperio employees.

In December 2020, Waddell & Reed Financial WDR inked an agreement to be acquired by Macquarie Asset Management, the asset management division of Sydney, Australia-based Macquarie Group.

Also, in October, Charles Schwab SCHW concluded the acquisition of TD Ameritrade Holding for roughly $22 billion.

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Waddell & Reed Financial, Inc. (WDR) : Free Stock Analysis Report

The Charles Schwab Corporation (SCHW) : Free Stock Analysis Report

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