Morgan Stanley evaluates acquisitions but sets a high bar for deals, CEO says

Morgan Stanley <MS.N> CEO Ted Pick, who runs one of Wall Street's biggest dealmakers, said his own firm was considering acquisitions but would set a high bar for purchases.

The Wall Street bank is evaluating opportunities that fit into its strategy, Pick told analysts who quizzed him on a post-earnings conference call on Wednesday. The bank would be more likely to buy smaller businesses that add to its existing operations, such as wealth or investment management, he added.

"There are inorganic opportunities that come by along the transom and we are looking at them, of course, but the bar is super high," Pick said. "We have a record of integration. That is a good one, but we have humility around what it takes to make integrations work."

Pick's predecessor James Gorman transformed Morgan Stanley through a series of major purchases that turned it into a wealth management powerhouse.

Gorman bought money manager Eaton Vance, online broker E*Trade and stock-plan manager Solium Capital. Those deals gave Morgan Stanley plenty of room to grow its existing businesses, Pick said.

"We are not looking to make acquisitions just for the sake of it," Pick said. "It may also be the case, though, and that inorganic opportunities come across the transom that give us incremental perspective or breadth."

While there are many potential asset management acquisitions because the industry is fragmented, and performance is variable, Pick said, "We are being very careful about that. ... Investment management roll-ups have had very mixed experience."

Morgan Stanley's profit beat Wall Street estimates in the second quarter as its traders cashed in on volatile markets, it reported earlier Wednesday. Rival Goldman Sachs' GS profit also exceeded expectations.

Goldman CEO David Solomon also told analysts that the bar for any acquisition for his bank is very high, but emphasized the importance of scale in the asset and wealth business.

"There's got to be a strategic fit in terms of things that we're prioritizing in the growth of our asset and wealth management franchise," he said.

"Then, of course, there's financial analysis around that which really gets to, what do you pay for? This is why the bar is high for doing these things," Solomon added.

Goldman's wealth business, which focuses on ultra-wealthy clients, had client assets of $1.7 trillion as of June 30. It supervises $3.3 trillion in assets more broadly, including through its asset management arm.

Morgan Stanley's total client assets across wealth and investment management reached $8.2 trillion in the second quarter.