James Gorman is becoming a shopaholic on Wall Street.
The Morgan Stanley chief announced early Thursday that his megabank is buying Boston-based fund manager Eaton Vance for $7 billion — just days after Morgan Stanley completed its $13 billion, all-stock acquisition of E*Trade Financial.
Gorman’s $20 billion spending spree brings his vision for the future of Morgan Stanley into clearer focus.
Acquiring Eaton Vance almost doubles the size of Morgan Stanley’s asset management group in one fell swoop, giving Gorman the kind of scale he has coveted for that business. Likewise, E*Trade gives Morgan Stanley 5 million retail trading customers, making it a player in that world.
“Eaton Vance is a perfect fit for Morgan Stanley,” Gorman said in a statement. “This transaction further advances our strategic transformation by continuing to add more fee-based revenues to complement our world-class investment banking and institutional securities franchise.”
The 62-year-old Gorman is wrapping up his tenth year in charge of the financial services giant, and like many of his peers, he has been building out new lines of business for Morgan Stanley to make it less reliant on its trading and dealmaking, which can be volatile.
Once the Eaton Vance deal closes, which is expected to happen in the second quarter of 2021, Morgan Stanley will have a major foothold in the active management of investment funds that the 96-year-old Eaton Vance has specialized in for decades.
Like the E*Trade deal, Gorman is paying a large premium to grab Eaton Vance. But he continues to appear eager to pay top dollar to strengthen the asset management group, which is his most profitable line of business this year.
With Eaton Vance on board, Gorman said Thursday that his firm “will oversee $4.4 trillion of client assets and AUM across its Wealth Management and Investment Management segments.”
That figure will widen Morgan Stanley’s lead over chief rival Goldman Sachs, and make it a threat to Bank of America, which remains the top dog in the wealth management game.
As rivals including Goldman Sachs move to cut headcount amid the coronavirus crisis, Gorman has pledged to freeze all layoffs in 2020 thanks to the COVID-19 pandemic. Gorman himself tested positive for the virus in April and he has made good on his pledge.
But with Eaton Vance adding almost 2,000 to Morgan Stanley’s headcount next spring, and E*Trade adding more than 4,000 this week, it now appears a near certainty that Gorman will have to make deep layoffs in the first few months of 2021.
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