The combination of styrene-acrylonitrile-glycidyl methacrylate (SAG) reactive copolymer and sodium lauryl sulfonate catalyst is able to function as an effective in situ compatibilizer for the otherwise immiscible and incompatible polymer blends of phenoxy and acrylonitrile-butadiene-styrene (ABS). The copolymer formed from the reaction between phenoxy and SAG under melt blending conditions tends to reduce interfacial tension in the melt and results in finer morphological domains of the blends. The presence of this in situ formed compatibilizer also raises the interphase adhesion of the blends and results in significant improvements in mechanical properties.