New York private equity and venture capital firm Insight Venture Partners is likely to buy ISS, the world’s largest proxy advisory service, after an auction held by owner MSCI, according to media reports.
Insight Venture Partners may pay as little as $300 mn for the proxy adviser, which MSCI bought in 2010 for $1.8 bn along with then-owner RiskMetrics Group, according to a report by the Wall Street Journal citing unidentified sources. RiskMetrics bought ISS in 2007 for $553 mn.
Insight Venture Partners, which has traditionally focused its investments on internet-based companies, has not commented on the report. According to its website, the company’s current portfolio includes investments in companies such as Twitter, Shopify, Indiegogo and Shutterstock.
MSCI’s board of directors announced last October that it had authorized ‘the exploration of strategic alternatives regarding ISS’ but gave few other details. ISS president Gary Retelny said at the time he expected ‘the current ISS management team to remain in place and fully dedicated to the business.’
The sale of ISS would come at a time of heightening controversy over the role of ISS and competitor Glass Lewis, which between them currently control about 97 percent of the proxy advisory market. Critics including members of Congress, NASDAQ OMX and others have complained the proxy advisory industry is poorly regulated and the key players have garnered too much influence.
Late last year NASDAQ requested in a filing with the SEC that the regulator demand full disclosure from proxy advisory services on their processes for formulating recommendations for shareholder votes. The exchange complained the advisers have gathered so much power that companies often feel compelled to follow their recommendations even when they are not in their shareholders’ best interests.
