Skip to Content
Stock Analyst Update

What Eaton Vance Purchase Means for Morgan Stanley

We don't expect to change our fair value estimate for narrow-moat Morgan Stanley.

Mentioned:

Our initial impression of narrow-moat Morgan Stanley’s (MS) acquisition of narrow-moat asset manager Eaton Vance is that it’s strategically sound but that it won’t move the needle on our $56 fair value estimate for Morgan Stanley. The deal is worth approximately $7 billion compared with Morgan Stanley’s market capitalization of over $85 billion. Eaton Vance shareholders will receive $28.25 per share in cash, 0.5833 share of Morgan Stanley stock, and a $4.25 per share special dividend before the close of the transaction. Morgan Stanley expects the transaction to be mildly accretive to earnings per share and increase returns on tangible equity about 100 basis points after expense synergies are achieved.

The implied value of the deal is materially higher than our stand-alone value for Eaton Vance, which we intend to increase to the takeout price, but comes with both financial and strategic benefits. The companies estimate $150 million of expense synergies. While this may seem low, the relatively low savings is from the firms being complementary and having less overlap in products. Having less overlap in asset management should lead to less disruption from the integration and keeping more of the combined firms’ revenue. Dis-synergies from client attrition often come with asset manager mergers, but leveraging each other’s distribution platforms, Eaton Vance for financial advisors in the U.S. and Morgan Stanley for institutional and international, could actually lead to meaningful revenue synergies.

Strategically, the acquisition scales Morgan Stanley’s asset management business and gives the company exposure to more positive trends in asset management, but wealth management remains more important to the firm. At $5 billion of revenue and $1.2 trillion of assets, Morgan Stanley will be one of the larger asset managers. However, asset management will still only constitute about 10% of the company’s total net revenue.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Michael Wong does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.