Institutional Shareholder Services, a Rockville-based company that provides research and analysis of corporate governance issues, is to be acquired by private equity firm Vestar Capital Partners for $364 million, the companies announced Tuesday.
ISS is one of the nation’s leading proxy advisory firms, meaning it works to help institutional investors such as pension plans, mutual funds and endowments decide how to vote on major shareholder decisions, including board appointments and mergers. It has 1,700 clients and employs about 700 workers in 15 offices worldwide. ISS’s leadership will not change as a result of the deal.
“This transaction underscores our belief in the importance of corporate governance and ISS’s leadership position within the industry,” said Vestar co-president Robert L. Rosner in a statement.
Vestar purchased ISS from MSCI, which provides stock market indexes and portfolio management tools to investors. Gary Retelny, president of ISS, said his company plans to expand its product offerings and add jobs after the acquisition is completed.
Retelny said ISS will benefit from being a stand-alone company instead of part of a broader portfolio of businesses, as it is at MSCI.
“The focus that that brings and the attention that that brings to a business, I always view as an extremely positive development,” Retelny said.
ISS and Vestar said they expect the deal to close in the second quarter.
In recent years, some critics have said that ISS and similar firms have too much sway over shareholder votes. In December, the Securities and Exchange Commission held a round-table discussion of the influence of these proxy firms and the impartiality of their recommendations.
ISS was purchased in 2010 by MSCI. MSCI said in October that it was exploring a possible sale of ISS. ISS said at the time that it was “very supportive” of the decision.
The sale “makes sense to us,” said Peter Wahlstrom, an analyst at Morningstar. “The ISS business under the MSCI umbrella didn’t seem to make a lot of sense. It was not strategic.”
Wahlstrom said ISS did not greatly overlap the other segments of MSCI’s business. He added that the $364 million price was higher than he had expected for ISS.
“It’s a good business; it’s just not one that grows a lot and it doesn’t have particularly high margins,” Wahlstrom said.
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