More than a decade into his tenure, James Gorman is busier than ever remaking his firm.
The Morgan Stanley chief has carried out a deal-making blitz that’s transformed the white-shoe firm from a Wall Street specialist to a big player in the world of money management.
If stealing away a wealth manager from Citigroup Inc. propelled the Melbourne-born banker to the top perch in 2010, his recent shopping spree guarantees that the 62-year-old executive’s mark will be left on Morgan Stanley long after he’s gone.
Gorman’s two latest mega-deals — the takeover of E-Trade Financial Corp., to go after millennials and other individual investors, and now the $7 billion purchase of asset manager Eaton Vance Corp., announced Thursday — are the largest carried out by any of the big banks in Wall Street’s post-crisis reincarnation.
And both were done in the span of just 10 months.
The acquisitions guarantee Morgan Stanley’s wealth and asset-management group a standing that overshadows the bank’s core Wall Street operations, despite their dominance.
And Gorman, who rose up through Morgan Stanley’s wealth business and has been bolstered by a stock price that’s outperformed major Wall Street rivals this year, said the 38% premium he’s paying to gain Eaton Vance’s roughly $500 billion in assets is worth it.
“We paid full dollar for it, I make no bones about that,” Gorman said in a Bloomberg Television interview Thursday. “I’ve met a lot of people who want to buy great companies cheaply, and they end up not buying anything.”
Gorman — who started out as a lawyer, became a McKinsey & Co. consultant, then turned to banking — is doing what he says is necessary to decrease risk at Morgan Stanley, cut reliance on Wall Street’s fickle fortunes and deliver a company that looks less like the investment bank he inherited a decade ago.
Now the chief executive officer says he’s done bulking up Morgan Stanley and is focused on integrating E-Trade and Eaton Vance — the type of challenge that’s tripped up many other CEOs.
“We are not doing more acquisitions,” Gorman said. “We’ve made our bed and we want to lie in it.”
Gorman’s rise to the top came after a period of bickering and infighting that sullied the top ranks of Morgan Stanley.
The financial crisis brought to the fore much bigger risks. Former CEO John Mack hired Gorman in 2006 to run wealth management, and soon after the firm pivoted toward his business with the purchase of Citigroup’s Smith Barney.
He’s among the last veterans of the financial crisis still atop a Wall Street bank, with Goldman Sachs Group Inc.’s Lloyd Blankfein gone and Mike Corbat handing over the reins at Citigroup.
JPMorgan Chase & Co.’s Jamie Dimon, the longest-serving CEO at the big banks, continually deflects questions about his succession plans after almost 15 years in the top job.
Gorman now faces the challenge of assuring a smooth hand-off to a team that he spent a big chunk of his tenure putting together. Gorman has no clear successor since the departure of former President Colm Kelleher last year.
“I definitely won’t carry on for 10 more years,” Gorman said. “There’s a natural transformation some point ahead in a few years. I know my limits. I know what is good for the organization.”
In trying to absorb an asset manager like Eaton Vance, Morgan Stanley is aiming to bulk up in a business whose lure of steady fees and low capital charges has attracted many others.
The takeovers of Eaton Vance and E-Trade come at a time when Morgan Stanley’s core Wall Street operations are minting money.
“It’s a happy coincidence,” Gorman said. “It gives everyone a skip in their step.”
Eaton Vance shareholders will receive a total cash-and-stock consideration of about $56.50 a share, split between $28.25 a share in cash and 0.5833 shares of Morgan Stanley, the bank said in a statement Thursday. Eaton Vance shares soared 48%, while Morgan Stanley climbed 0.6%.
After the acquisition, Morgan Stanley Investment Management will have about $1.2 trillion under management and more than $5 billion in revenue. The purchase is expected to be completed in the second quarter of next year.
The asset-management industry has been under pressure to consolidate further. Nelson Peltz’s Trian Fund Management LP built up stakes in Invesco Ltd. and Janus Henderson Group Plc as the activist firm rallies for mergers in the industry.
Gorman said two years ago that he wanted his asset-management unit to hit $1 trillion in client assets in coming years. The firm had long held that it could achieve significant growth without a big deal, but struggled to deliver.
In 2014, Greg Fleming, who oversaw the unit at the time, said reaching $500 billion by the end of 2016 was achievable. The bank finally hit that mark last year.
Morgan Stanley had more than $600 billion in assets under management in 2008. After the financial crisis, the bank sold its retail asset-management business, which included Van Kampen Investments, acquired in 1996.
“In hindsight, I’m not sure that was a great idea,” Gorman said in a 2018 Bloomberg Markets interview.