James Gorman, chief executive officer of Morgan Stanley


Michael Nagle/Bloomberg

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More consolidation and more reliance on fees. Those two Wall Street trends took the spotlight this past Thursday when

Morgan Stanley

said that it would pay $7 billion for

Eaton Vance.

The deal, coming on the heels of the Wall Street giant’s purchase of discount broker E*Trade, marks another step in its retreat from its somewhat swashbuckling pre-financial-crisis persona, when it made much of its money from risky trading. And it fits in with a wave of consolidation reshaping the money-management industry.

Combined, Morgan Stanley (ticker: MS) and Eaton Vance (EV) would generate $26 billion in annual pro forma net revenue, much of it from steady fee income for overseeing $1.2 trillion in assets and providing associated services.

Eaton Vance has a strong lineup of mutual funds offered under its own name, many focused on fixed income. It also owns the Calvert Research & Management funds, which specialize in sustainable investments; Parametric, which provides customized indexes and other tools for investors; and Atlanta Capital, a firm that invests in small- and mid-cap stocks. All could benefit from having their offerings integrated into Morgan Stanley’s powerful international distribution network. Eaton Vance is also strong in domestic distribution to intermediaries, such as financial advisors, and owns an in-house advisory firm, Eaton Vance Investment Counsel.

The acquisition is expected to close in mid-2021. For each Eaton Vance share, an investor would get 0.5833 of a Morgan Stanley share, plus $28.25 in cash. Based on Morgan Stanley’s recent stock price, this totals $56.50. Eaton Vance holders would also get a one-time special cash dividend of $4.25 per share from that company, paid before the closing.

On a conference call, CEO James Gorman expressed hope that the deal would boost Morgan Stanley’s