Morgan Stanley is hot on the trail to grow a $463 billion business, but there's 1 type of deal it won't do
- Morgan Stanley is looking to buy firms for both its wealth and investment management businesses, chief executive officer James Gorman said on Thursday's fourth quarter earnings call.
- The bank could acquire firms across a number of platforms, including equity, fixed income, liquidity, and alternatives and solutions - but it won't do a mega-deal.
- Morgan Stanley's first post-recession acquisition closed in 2018. The firm bought a real estate debt platform, which added $5 billion in assets.
Morgan Stanley is known for advising big companies on complicated M&A. But now the Wall Street bank is hungry for its own deals.
CEO James Gorman said on Thursday that the firm is newly on the hunt for companies to complement and strengthen its $463 billion investment management business.
The bank hadn't done a deal since the financial crisis and the acquisition of brokerage Smith Barney from Citigroup in 2009 until last year, when it acquired Mesa West, a real estate debt platform.
The deal added $5 billion in assets under management to Morgan Stanley's investment management business, which Gorman has said he is looking to grow to $1 trillion in assets in the coming years.
"That was sort of our little test tube, getting our foot back in the water. I think it was a couple of hundred million dollars just get a sense of it and I think that's going great," Gorman said on the firm's fourth quarter earnings call.
Now, Morgan Stanley is eyeing a range of opportunities across its businesses.
"We're not suggesting we're about to do a mega-deal in asset management," Gorman said. "And you and I and everybody else knows those are complicated and not all of those have been successful over time. But ... we're fortunate to have a platform that plays in pretty much every space."
In a company presentation that accompanied earnings results, all of Morgan Stanley's platforms within investment management could be buyers: equity, fixed income, liquidity, and alternatives and solutions.
Fixed income and equities, for example, are "scale-driven" businesses that could be built out by acquiring teams aor small firms, Gorman said.
Morgan Stanley could execute "string of pearls-type acquisitions across the platform, while driving organic growth in the actively managed, which is the higher margin business; get better scale in the fixed income platform; and do this over a period of years and not hope for a single answer, but a series of answers, [and] I think there's a lot of space in there," Gorman said.