International exchange organisation Deutsche Börse announced today an agreement to acquire a majority stake of leading corporate governance and ESG data and analytics company Institutional Shareholder Services Inc. (ISS). According to the terms of the deal, Deutsche Börse will take an 80% interest in the company, while private equity investor Genstar Capital and current ISS management will continue to hold a stake of approximately 20%.

The transaction values ISS at approximately $2.3 billion, marking a major win for Genstar, who acquired ISS in late 2017 at a valuation of $720 million.

According to Deutsche Börse, the deal is intended to position the company as a leading global ESG data player, committing the company to one of the key megatrends in the investment industry. Deutsche Börse stated that the partnership of a global market infrastructure provider with a leading corporate governance, ESG, data and analytics provider forms an excellent foundation to fully realise opportunities for future growth in ESG-based investing globally.

Theodor Weimer, CEO of Deutsche Börse AG, said:

“ISS is a very successful company with a high reputation worldwide as a global market leader in providing data, analytics and insights to investors and companies as well as governance services. It is one of the leading ESG providers. Its ESG expertise and data capabilities perfectly link to Deutsche Börse’s business model along our entire value chain. Together, ISS and Deutsche Börse have complementary ingredients to become one of the globally leading ESG players of the future. We have been deeply impressed by the culture and the leadership team of ISS. We look forward to partnering with ISS and working together to support the company’s continued business growth and jointly drive forward Deutsche Börse’s strategy.”

The companies noted the highly complementary nature of the combination, with opportunities including partnering ISS with the leading index and analytics capabilities of Deutsche Börse Group’s Qontigo, and linking ISS’ data distribution with the network of the Group’s post-trading services provider Clearstream in the investment funds space. Geographic synergies exist as well, given ISS’ strong footprint in the US, and Deutsche Börse’s leading position in Europe.

Stephan Leithner, Member of the Executive Board of Deutsche Börse AG, responsible for the Pre- and Post-Trading businesses, said:

“ISS combines an emphasis on global corporate governance with an increasing focus on a broader definition of ESG standards, where Europe currently plays a trendsetter role. In this sense, we see our future partnership as a perfect combination to drive innovation and deliver the best expertise for ISS’ traditional investor clients and Deutsche Börse’s financial intermediary clients. As a neutral market infrastructure provider, Deutsche Börse is a natural candidate to provide these kinds of services.”

Gary Retelny, ISS President and CEO, said:

“Deutsche Börse’s market-leading brands and solutions align very well with ISS’ offerings within our governance, ESG, index and market intelligence businesses. We believe that the potential combination of ISS’ ESG data and STOXX’ indices will offer clients new, powerful and innovative solutions with unique data sets that meet their evolving investment needs. We at ISS look forward to partnering with Deutsche Börse, along with Genstar Capital, as we continue to build upon the success of our diversified businesses around the world. As we have for more than 35 years, we remain committed to ensuring the provision of the highest quality research, data, analytics, and insight to our clients globally.”

Genstar Capital Managing Director, Tony Salewski, said:

“Gary and the ISS management team have built a market-leading data and governance platform through innovative product development and impactful acquisitions, and we appreciate the partnership we have had with them over the past three years. As we continue as investors in ISS, we are excited by the value that Deutsche Börse will bring and our shared commitment to further accelerate ISS’ growth.”

The companies stated that the transaction is expected to close in the first half of 2021 subject to customary closing conditions and regulatory approvals.