Whatâs Going On Here?Houston, we have an acquisition: Morgan Stanley announced itâd buy investment management firm Eaton Vance for $7 billion in a bid to take its business into the stratosphere (tweet this). What Does This Mean?Eaton Vance has made a name for itself in recent years through highly customizable and tax-efficient investment funds, to the benefit of its mostly American customers. And like almost all investment management firms, it earns a proportion of the cash it looks after as fees.
It seems to have done enough to impress Morgan Stanley, whose purchase will be split between cash and stock. Investors will receive $28.25 and exactly 0.5833 shares of Morgan Stanley for each share of Eaton Vance they own, totaling $56.50. Thatâs 38% more than Eatonâs shares were worth on Wednesday. Why Should I Care?The bigger picture: Slow and steady.
âWealth managementâ â looking after the money of well-to-do individuals â is Morgan Stanleyâs smallest but most profitable business segment. So adding Eaton Vance to the mix will give it â and its related investment management business â a boost. Both segments tend to be stable in both good and bad times, especially compared to, say, trading, which has super-high highs and depressingly low lows. Some investors prefer that predictability, which might be why one of Barclaysâ investors has been trying to push the British bank toward more stable savings and loans businesses â with no luck.
For markets: The art of the deal.
Morgan Stanleyâs CEO has a long-standing reputation as a dealmaker, and heâs expanded his portfolio recently by buying Canadian fintech Solium Capital and online brokerage E-Trade. Between the formerâs business in managing employee stock plans and the latterâs catering to a new wave of amateur traders, Morgan Stanley might be building a full-service platform customers would be happy to pay for â a rarity these days. | 