Financial Analysis of Mergers and Acquisitions: Bridging Theory and Practice in the Morgan Stanley, E*Trade, and Eaton Vance Transactions

By considering the critical importance of mergers and acquisitions as a strategic tool for corporate growth and market consolidation, it is crucial to understand the connection between M&A theories and their real-world applications. In this thesis, in the literature review part, we will have a brief overview of M&A theories such as Synergies Theory, Resource-Based View Theory, Competitive Advantage Theory, Market Entry Theory, Diversification Theory and Strategic Fit Theory. Later, we will examine how these theories were applied in the Morgan Stanley case with the E*Trade and Eaton Vance acquisitions and the results and strategies involved. In the next part, we will have a case introduction that explains processes like price negotiation, valuation methods, price paid, payment method, legal barriers, etc. Furthermore, in the analysis section, we will take a look at the acquisition as a whole and analyze different aspects of the transaction, such as changes in goodwill, strategic and financial motivations for the transaction, effects on market share, and changes in key financial metrics such as revenue, ROTCE, EPS, net margin, etc. Also, we will compare the pre-acquisition and post-merger periods to see how much the performance of the company has been affected by the transaction. In the end, we will use geometric Brownian motion to see how the expectations of investors have changed due to the transaction.