The German stock exchange operator, Deutsche Börse AG, has agreed to a buy a majority stake in proxy adviser firm Institutional Shareholder Services (ISS).

Deutsche Börse will buy an 80% stake in a transaction which values ISS at US$2,275 million for 100% of the business. Current owners, Genstar Capital, and management will continue to hold a 20% stake.

This is the fourth ownership change for ISS in the past decade (see our last article HERE). Current owner Genstar Capital bought ISS for US$720 million in 2017 from Vestar Capital Partners. Vestar had bought the company in 2014 for $364 million from MSCI, which had owned ISS since 2010.

Let us repeat that: in 2014, ISS was worth $364 million. In 2017 it was worth $720 million. In 2020 it is worth US$2,275 million. While there has no doubt been a bit of capital bulking up on the journey, it has not been a bad return, even for private equity.

The transaction is expected to close in the first half of 2021 subject to regulatory approvals. In a statement, Deutsche Börse said the purchase positioned it to fully realise opportunities for future growth in ESG-investing and leverage its global index franchise. After the closing, ISS will operate with editorial independence in its research and data organisation and the current executive leadership team will continue to lead the business.

It also revealed that ISS is expected to generate net revenue of more than US$280 million, with an adjusted EBITDA margin of 35%, and that net revenue is forecast to grow organically by more than 5% per annum to 2023. Most of ISS revenues and profits come from services to companies, leveraging off their advice to institutional investors. However, ISS’ management of conflicts of interest are publicly disclosed (see HERE), and required to be disclosed in reports lodged in various countries to comply with local regulation.

See the DB release HERE. 

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