RiskMetrics Group, Inc., a leading provider of risk and corporate governance services to participants in the global financial markets, announced today that it has agreed to acquire Innovest Strategic Value Advisors. Headquartered in New York, Innovest is a leading provider of sustainability research for the institutional investment community. The acquisition of Innovest and its team of experts led by co-founders Dr. Matthew Kiernan and Hewson Baltzell, enlarges RiskMetrics footprint in the environmental, social & governance research space at a time when the financial community's interests in sustainability are growing.
Established in 1995 with the mission of integrating sustainability and finance by identifying non-traditional sources of risk potential for investors, Innovest specializes in analyzing companies' performance on environmental, social, and strategic governance issues. The acquisition will bring together two established firms with deep expertise in the newly emerging field of climate governance and carbon finance.
"A myriad of long-term sustainability factors, particularly around climate change, are playing an increasingly important role in the way funds invest and view their portfolio risk," said Stephen Harvey, head of the Governance business at RiskMetrics Group. "Innovest is one of the few firms that has successfully taken a quantitative approach to assessing ESG issues, thereby helping investors view what are typically intangible, compliance-oriented issues through a clearer financial lens."
RiskMetrics currently provides ESG research, data feeds and portfolio screening tools to more than 350 global institutions that have a need to comply with clients' investment mandates. With the acquisition of Innovest, clients will have access to an ESG analyst team of more than 50 research professionals and an integrated environmental, social & governance suite of research and compliance-focused services.
"It would be an understatement to say that today's turbulent market environment is placing an unprecedented premium on understanding the entire spectrum of investment risks - both traditional and non-traditional," said Dr. Matthew Kiernan, co-founder and chief executive officer of Innovest Strategic Value Advisors, Inc. "By combining Innovest's ESG research with RiskMetrics leading capabilities in risk management and corporate governance, we can help investors make more-informed decisions."
The transaction, which is subject to customary closing conditions, is expected to close March 2, 2009.
Separately, RiskMetrics Group today announced its financial results fts fesults for the fourth quarter and year ended December 31, 2008.
Earnings Highlights: GAAP results reflect the acquisition of Institutional Shareholder Services (ISS) on January 11, 2007 and the Center for Financial Research and Analysis (CFRA) acquisition on August 1, 2007. Pro forma results for the year ended December 31, 2007 are presented as if ISS and CFRA were acquired on January 1, 2007 (see Tables D and E for a reconciliation of GAAP and Pro Forma financial results).
* Fourth quarter 2008 revenues increased 11.6% to $75.5 million while revenues for the year ended December 31, 2008 increased 23.3% to $296.4 million, and 17.1% on a pro forma basis.
* Fourth quarter 2008 Adjusted EBITDA increased 35.8% to $29.2 million. Adjusted EBITDA for the year ended December 31, 2008 increased 38.9%, and 32.1% on a proforma basis, to $101.1 million, with an Adjusted EBITDA margin of 34.1%.
* GAAP fourth quarter 2008 net loss of $149.1 million, or $2.43 per diluted share and $136.9 million, or $2.28 per diluted share for the full 2008 year due to an impairment charge. Fourth quarter 2008 includes a non-cash pre-tax $160.1 million impairment charge for acquired ISS goodwill and intangible assets due to declines in industry market multiples in the second half of 2008. EPS before the impairment charge was $0.13 per diluted share for fourth quarter 2008 and $0.31 per diluted shared for the full 2008 year.
* Adjusted EPS (before amortization of intangibles, one-time costs, impairment charges and stock-based compensation) for fourth quarter 2008 was $0.20, up from $0.11 in fourth quarter 2007 and $0.65 for the full 2008 year, up from $0.31 in the prior year.
"We continue to deliver strong financial results despite unprecedented conditions in the financial markets." said Ethan Berman, Chief Executive Officer of RiskMetrics Group. "We achieved annual revenue growth of 17.1% and expanded our EBITDA margin by 380 basis points for the year indicating the significant economies of scale in our operating model. We generated $84.8 million of cash flow from operations in 2008, nearly double 2007."
Mr. Berman continued, "While we continue to have a strong new sales pipeline, the difficult market conditions are causing a lengthening of our sales cycle and pushing renewal rates below historical trends, leading to a slowing of revenue growth. On the other hand, our investments in technology are allowing us to continue to realize operational efficiencies and deliver greater than expected EBITDA margin improvements."