In 2014, Vestar identified Environmental, Social and Governance (“ESG”) as an area of growing importance in business and financial services, particularly governance and responsible investing solutions. With that in mind, the firm identified an opportunity to carve ISS out of its former corporate parent, MSCI Inc. , as a way to invigorate new business sales and operational efficiency. Vestar believed that, as a standalone entity with an established a strong brand and over 50% global market share, ISS would make an excellent platform for expansion. The company also had an attractive business model, with high recurring revenue, retention rates and free cash flow profile, as well as a talented management team.

Early in the process, Vestar formed a close relationship with CEO Gary Retelny, aligning on the core thesis of establishing ISS as an independent entity and using it as a platform to pursue attractive growth opportunities. With the firm’s successful track record of executing complex corporate carve-outs, Vestar emerged from a highly competitive pool of buyers as management’s preferred partner to ultimately prevail in the auction.

Vestar and management worked closely together to establish ISS as a standalone entity, filling out the senior management team and investing in the systems and infrastructure to accelerate organic growth. Working together, ISS completed five strategic acquisitions, expanding the company’s capabilities in ESG data and analytics and scaling its offering to both institutional investors and corporate issuers.

Despite the complexity of the carve-out and the incipient nature of the ESG market, under Vestar’s strategic guidance and management’s strong leadership, the company achieved its shared goals earlier than expected. ISS was sold at approximately three times Vestar’s initial investment, while ISS developed into an attractive, high-growth platform with a clear market leadership position in ESG. The outcome was a win-win for the company and investors.