Morgan Stanley announced on Monday that it would buy Canadian fintech firm Solium Capital for $900 million (it will pay $19.15 Canadian per share)
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Morgan Stanley CEO James Gorman told The Wall Street Journal he'd
like to "do more" acquisitions. "Last year was the first time we
felt comfortable that we could even consider" acquisitions.
According to Finimize, Solium
manages employee stock plans for a million people at 3,000 companies, including
Instacart and Levi Strauss. Employees – especially those at startups – often
get compensated with a piece of the company pie along with a paycheck. The
various options and taxes involved can get complicated – which is where
Solium’s software comes in.
According to Finimize, Morgan Stanley is playing the long
game. Startup employees can get rich overnight – if their company
gets acquired or goes public, for example. And what are these employees to do
with the wads of cash in their hot little hands? If they’re savvy Finimize
readers, they’ll probably want to invest – and Morgan Stanley can help them do
just that, for a tidy fee. According to FactSet, 44% of the bank’s revenue
comes from “wealth management” – a.k.a. investing rich people’s money. If
Morgan Stanley already looks after your employee stock plan, you might be more likely
to invest with them too.
Morgan Stanley’s stock fell 1% on Monday. It’s paying a hefty
43% premium for Solium, valuing the company at more than seven times its sales
over the last year – compared to Solium’s peers’ average valuation of two to
three times sales (tweet this), according to FactSet.
Investors are likely
worried that Morgan Stanley’s blockbuster plan won’t play out as hoped. Banking
rival Goldman Sachs might disagree: it’s expanding its tax advisory business
down the employee ranks, likely hoping to similarly curry favor with the future
rich.
