For years, Institutional Shareholder Services has weighed in on countless shareholder votes on mergers, intoning whether investors should support a transaction or vote against it.
Now the proxy advisory firm - informally known as I.S.S. â€" is about to be sold itself.
MSCI, the parent company of I.S.S., agreed on Tuesday to sell the business to the private equity firm Vestar Capital Partners for $364 million.
Vestar will become the latest owner of I.S.S., widely considered the heavyweight of the proxy advisory industry. Such firms provide guidance to their clients, including big mutual funds, on matters up for a shareholder vote like mergers or board elections.
I.S.S., which was founded in 1985, now has nearly 700 employees in 10 countries and 1,700 clients.
But many participants in proxy battles have complained about the power the firm wields in contested situations. The business came under public scrutiny during a round-table discussion held by the Securities and Exchange Commission in December.
“The question really is whether I.S.S., which owns no stock, should have the power of a $4 trillion voter,†Trevor S. Norwitz, a partner at the law firm Wachtell, Lipton, Rosen & Katz, said at the time.
Even so, many participants in corporate governance battles feel obligated to make their case before I.S.S. analysts anyway. At the same time, however, investors do not always vote according to the firm’s recommendations.
MSCI has owned I.S.S. since 2010, when it bought the advisory firm’s parent, RiskMetrics, in a deal valued at $1.55 billion at the time. (RiskMetrics itself had purchased I.S.S. in 2007.)
I.S.S. said that it planned to expand its offerings under its new owner.
“With Vestar’s support, the management team looks forward to advancing I.S.S.’ longstanding mission of providing world-class corporate governance solutions in an independent and transparent manner,†Gary Retelny, the I.S.S. president, said in a statement.
Morgan Stanley and Davis Polk & Wardwell advised MSCI, while Simpson Thacher & Bartlett counseled Vestar.
