Deutsche Börse AG today announces that it will acquire a majority stake of approximately 80% in Institutional Shareholder Services Inc. (ISS), valuing ISS at USD 2,275 million (EUR 1,925 million) for 100% of the business (cash and debt free). Genstar Capital and current management will continue to hold a stake of approximately 20%.
The transaction is expected to close in the first half of 2021 subject to customary closing conditions and regulatory approvals.
This partnership of a global market infrastructure provider with a leading corporate governance, ESG, data and analytics provider forms a strong foundation to fully realise opportunities for future growth in ESG-based investing globally. With this transaction, Deutsche Börse commits to one of the key megatrends in the industry that will fundamentally change the investment space over the coming years. ISS’ ESG and data expertise is poised to allow Deutsche Börse to emerge as a major global ESG data player.
ISS’ more than 4,000 clients include many of the world’s leading institutional investors that rely on ISS’ objective and impartial governance and ESG data and research, as well as public companies focused on ESG and governance risk mitigation as a shareholder value enhancing measure. This transaction will bring a strengthened capital structure to ISS and the ability to further accelerate organic and inorganic growth initiatives for the benefit of ISS’ clients while leveraging the infrastructure of Deutsche Börse and, in particular, its global index franchise.
After the closing, ISS will continue to operate with the same editorial independence in its data and research organisation that is in place today. The current executive leadership team with CEO Gary Retelny will co-invest in the transaction and will also lead the business of ISS after the closing.
The businesses of ISS and Deutsche Börse are highly complementary and offer the potential for revenue synergies along the Group’s entire value chain: the partnership of ISS with the leading index and analytics capabilities of Qontigo, which is also part of the Group, will open opportunities for ESG growth on both sides. Further linkages along the value chain include ISS’ data distribution, which will benefit from the leading position of the Group’s post-trading services provider Clearstream in the investment funds space.
In total, revenue synergies are expected to result in EUR 15 million additional EBITDA by 2023.
In 2020, ISS is expected to generate net revenue of more than USD 280 million (pro-forma IFRS) and an adjusted EBITDA margin of approximately 35% pre-transaction effects, which has further operating leverage potential. Net revenue of ISS is expected to grow organically at a rate of more than 5% on average per annum until 2023.