Morgan Stanley's $7 billion deal to acquire Eaton Vance Corp. is seen as a plug-and-play transaction, with industry sources in general positive on the coming together of two businesses with different, but complementary, strengths.
The transaction, which will create an investment management business with about $1.22 trillion in assets under management, is expected to close mid-next year and will be funded via stock and cash.
The intent is to fill gaps in offerings, share and expand distribution of strategies, and help to balance Morgan Stanley's capital-intensive businesses, such as investment banking, with the relatively balance sheet-light operations of money management, James Gorman, Morgan Stanley's chairman and CEO, said in a conference call with analysts on Oct. 8.
The rationale for the deal is also different to other manager M&A, said Stephen Tu, New York-based vice president and senior credit officer in Moody's Investors Service Inc.'s financial institutions group. "You compare it to the logic of a lot of other deals being done," which are about scale, cost savings and 'how do you survive.' But here, that's what sets this deal apart from some of the others we've seen in the space." Those factors do not appear to be "the primary motivation for the deal," he said.
Boston-based Eaton Vance ran $507.4 billion as of July 31 through four of its investment affiliates: active manager Eaton Vance Management, which runs equity, fixed income, multiasset and alternatives strategies and accounts for about 29% of AUM; systematic, customized solutions firm Parametric Portfolio Associates LLC, which accounts for about 61% of AUM; active equity and fixed-income manager Atlanta Capital; and responsible investment manager Calvert Research and Management. Atlanta and Calvert each account for about 5% of Eaton Vance's total AUM.
The firm also owns 49% of global equity manager Hexavest Inc., which has $8.5 billion in AUM.
Morgan Stanley Investment Management Inc. has $715 billion in assets across strategies including active fundamental equities, fixed income, multiasset, real assets, and private credit and equity.