The definitive agreement will see financial services firm Morgan Stanley acquire $500 billion in AUM from Eaton Vance for an equity value of about $7 billion, a joint news release said.
The deal is expected to complete in the second quarter of next year.
Morgan Stanley’s money management unit, Morgan Stanley Investment Management, has about $665 billion in assets under management. The two money managers are “highly complementary with limited overlap in investment and distribution capabilities,” the release said.
Eaton Vance runs active, systematic and responsible investment strategies through its five investment affiliates: Eaton Vance Management, Parametric Portfolio Associates, Atlanta Capital, Hexavest, and Calvert Research and Management. The acquisition “fills product gaps and delivers quality scale to the MSIM franchise,” the release said.
On an analyst call Thursday, Morgan Stanley CEO James Gorman said the firm has shifted toward more “balance sheet light business,” such as money management. He described these shifts as providing “balance and speed.”
“We want to make sure that in very difficult times, Morgan Stanley is steady in the water. We needed balance to make that happen,” he said.
He said the deal provides “quality scale” in the value-added fixed-income business and also enhances client reach, combining Eaton Vance’s U.S. distribution capabilities with MSIM’s international platform.
Mr. Gorman said many money management firms “are merging simply to get scale in one space. With that comes a lot of friction, a lot of breakage ... there are pieces of this business that simply don’t touch other pieces.”
Dan Simkowitz, head of MSIM, said on the same call that the deal is “very unique given we are combining from positions of strength.”
Given that the companies are “culturally in sync ... we believe execution risk is low.”
He said there will be very little disruption to clients, but they will benefit from “the power of these platforms in combination,” giving the example of how Eaton Vance’s Atlanta team, which focuses on U.S. midcap equities, “fits very well” with MSIM’s concentrated active equity strategies.
The deal also creates a “scaled fixed-income platform with high-quality, specialized strategies across loans, high yield, munis and emerging markets debt,” Mr. Simkowitz said. He said MSIM over the last year has “undertaken efforts to start building loans and muni bond segments — but the combination with Eaton Vance fills both these gaps.”
He also cited Eaton Vance’s customization business, through Parametric, and sustainability capabilities, through Calvert, as “two of the main drivers of the combination.”
Eaton Vance shareholders will receive a total cash and stock consideration of about $56.50 a share, the release said.
Further details on how Eaton Vance will be integrated into Morgan Stanley and any changes to leadership could not immediately be learned.