ISS to Be Acquired by Vestar Partners for $364 Million

March 21, 2014

MSCI, Inc., the parent company of Institutional Shareholder Services, announced this week that it had entered into a definitive agreement to sell ISS to private equity firm Vestar Capital Partners for $364 million.  According to an ISS press release, the transaction is expected to close in the second quarter.  ISS will operate "independently" going forward, and the ISS management team is expected to remain in place. The ISS press release quotes ISS President Gary Retelny stressing ISS's independence, objectivity and transparency.  Robert Rosner, Founding Partner and Co-President of Vestar Capital Partners, also states "ISS is a market leader in providing corporate governance solutions, with strong client retention rates and a powerful commitment to operating impartially. We fully support the ISS management team and its focus on innovation and providing unrivaled client service."  For ISS, the acquisition removes one conflict of interest—being owned by MSCI, the provider of financial ratios and risk management tools, and the co-creator of GICS codes.  However, the deal raises the question as to whether a private equity owner will result in pressure on ISS to increase its revenues by expanding its consulting services business, ISS Corporate Services.  There has been an increase in aggressive marketing from ISS Corporate Services, and in some cases, an alarming blurring of the lines between the consulting and corporate governance research businesses.  Vestar Capital Partners describes itself as "a leading U.S. middle market private equity firm specializing in management buyouts and growth capital investments" and is focused on three sectors—consumer, diversified industries, and healthcare.  The ISS acquisition is substantially larger than its target investment of between $50 million to $200 million.