Ordinarily, we lead off the 1st quarter issue with our “Early Returns” from the Annual Meeting front. But since our last update on the Transfer Agency world in our year-end Special Supplement - focusing on “Transforming Shareholder Relations” - there has been an astonishing variety of new and potentially “transformative” developments in the intensely competitive Transfer Agency arena - including acquisitions, new ventures and a raft of senior management changes and additions to staff. And yes, “What’s Up with Those Transfer Agents?” is still the number-one question we get from readers.
Here, in alphabetical order by T-A, are some updates:
At AST:
Gearing up big, it seems, for its promised “transformation” AST announced a new CFO in January, Brett Weinblatt, “to oversee the company’s financial strategy and operations. He will report to Chief Executive Officer Marty Flanigan. “Most recently, Weinblatt was the Senior Vice President and Chief Financial Officer at Corporate Risk Holdings (formerly known as Altegrity), a company with more than 4,000 employees worldwide and over $800 million in revenue. Earlier, he was Senior Vice President and Chief Accounting Officer at Avis Budget Group and before that, he was VP and Chief Financial Officer for multiple divisions at Alpharma. “We look forward to embarking on a transformational year with Brett as part of our core leadership team” said Flanigan.
In February, AST announced that “Alan Eddie has joined as Chief Technology Officer, overseeing the company’s technology strategy and operations” and also reporting to Flanigan. “Based in New York, Eddie was most recently Chief Information Officer of Trading Technology at Nordea, the eighth-largest bank in Europe, delivering and managing technology solutions for its Capital Markets, Wholesale Banking, Wealth Management and Asset Management practices. Earlier, he served in senior technology roles at JP Morgan Chase, RBS, UBS and Citigroup’s Cash Management unit. “Eddie is an innovative leader adept at building and integrating global teams, and he brings extensive experience in strategic technology planning, innovation and digital transformation.” (Oh good….that “t-word” again’) “Alan is well known and respected for his strategic leadership and innovative approaches, having made a transformative impact on some of the world’s preeminent banks through large-scale business line and company integrations, the buildout of regulatory reporting and lending systems, and the implementation of revolutionary platforms to manage client interactions…We are pleased to welcome Alan to our senior leadership team and know he’ll play a key role in the ongoing transformation of our business, to the benefit of our clients.” said Flanigan.
THEN IN MARCH, AST ENTERED THE PRIVATE-COMPANY REGISTRAR BUSINESS: “AST Private Company Solutions™ is developing innovative and next-generation technology, products and services to support the entire lifecycle of a private company, including when the next phase involves going public….we are building something truly special, using next-gen software to support private companies and their investors, employees and advisors….[and] will introduce a robust offering for various types of private companies, from venture-backed to private equity-owned, including capitalization and waterfall tracking, employee stock plan administration, and related transactional and liquidity support. The company will be headquartered in Silicon Valley, one of the U.S.’s primary epicenters for start-up activity, and will launch its solution later this year.”
And in yet another noteworthy beefing-up of senior staff, AST “appointed Carine Schneider, FGE, to lead AST Private Company Solutions as President. An experienced and well-connected entrepreneur in the private company market and global compensation industry…she has held positions including President of Nasdaq Private Market Equity Solutions, CEO and Board Director at Certent, and Founder, CEO and Board Director at Global Shares. She was formerly a Partner with PwC and Nua Group and has held senior roles at Morgan Stanley and Towers Watson.
“There are millions of private companies in North America and around the world, and in this market environment, many are staying private longer” the press release noted. “Historically, they have had to work with multiple providers for the critical services that keep their businesses running smoothly, but we can give them the convenience and stability of an integrated, AST-backed platform. AST already serves some 400 private companies, and we are making a significant commitment to expanding in this space. We’re going to do it right, and that includes bringing in leaders who have spent their careers building solutions for the private market.”
To support the new venture AST also made two more additions to senior staff: “Central to the buildout of AST Private Company Solutions’ innovative software is Steve Madeira, who has joined as CTO…recently CTO of SynchroNet and, before that, Head of Product Operations at Nasdaq Private Market and Senior Vice President at Certent. Earlier…he held various senior positions at Navio Systems, Inc., ePeople, Philips Electronics, Siemens and IBM.: (Whew!) Madeira will be joined by Eric Kissler as Chief Architect. Kissler was formerly Principal Architect with Certent.
Clearly, AST is making a big investment - and a big bet on succeeding in this space - and we wish them all our best - and hope that their math proves to be on-the-money. As we noted in our last issue, Carta - which was a previously unknown entity to us - already has around 2,000 privately owned companies as clients. And Computershare, which had been focusing on this space for a few years, but now seems to have lost interest, has around 200. But AST, with 400 such clients right now, has a very nice “jump” here, we think - with a solid base, a solid space in the TA world to grow on - and a special understanding, we think, of the needs of highly entrepreneurial but much smaller than average companies, much as they have in the newly hot Employee Plan space as well….
AT BROADRIDGE:
Rather quietly it seems to us, Broadridge has been gaining very significant traction vs. competitors in the T-A space of late: In 2018 they added 46 new T-A clients - which was more than all of their top competitors’ wins combined - a record they’ve maintained over the last six quarters (!) - including many large-cap companies like Boise Cascade, Constellation Brands, Deere & Co, Eaton, Liberty Media, New Jersey Resources, Piper Jaffray and Sysco to name a few.
They also landed some mega Reorg deals, including Cigna’s acquisition of Express Scripts and the Bristol Myers - Celgene deal.
Most significantly, we think, for the T-A marketplace as a whole, market adoption of Broadridge’s “Annual Meeting/Proxy Solution” - where public companies consolidate all of their Annual Meeting printing, mailing, e-distribution and proxy tabulation with Broadridge - continues to expand at a very robust rate: In calendar year 2018 over 275 public companies, with roughly 2.5 million registered shareholder records, became client adopters.
Still further, Virtual Shareholder Meetings are expanding at a rapid rate - and other transfer agents are completely unable to offer them - due to the need to allow all shareholders who wish to do so to vote online during the meeting - coupled with the total disinclination of bank and broker custodians to “give up” the names and voting entitlements of their beneficial-owner clients to other Transfer Agents. In 2018, 285 issuers held Virtual Meetings - a 20% increase vs. 2017…and we are betting the 2019 numbers will be up by another 20% - or more.
Another HUGE win for Broadridge - and no small thing in the competitive arena - they were ranked number-one in the financial data services industry in FORTUNE Magazine’s 2019 list of “The World’s Most Admired Companies.”
In yet another recent development - which we noted in the course of our usual “tombstone watching” - Broadridge has entered the Information Agency business - with some big successes right out of the box. The combination of strong existing relationships with issuers - where every single one needs to deal with Broadridge every year, to handle the “street-side” distribution and voting at their shareholder meetings - plus Broadridge’s fast-growing printing capabilities - plus the allure of “one-stop shopping” where over-busy corporate people are concerned - and the need for speed - and a high degree of dependability too - represents something of a threat to proxy solicitors, who have been the traditional players; here. But it poses a much bigger threat, we think, to the Reorg departments of other TAs - where the issuer’s TA has been the traditional Depository of choice.
And then…just as we were going to press, came another big announcement - a bombshell, we think: Remember our last issue, where we noted Broadridge’s roll-out of a broker-app that allows voters to vote over their mobile devices…which we said was “maybe the biggest breakthrough ever to increase retail voting”?
Now, Broadridge has rolled out an even bigger and broader app: It will allow investors with an iPhone or Android device to get a free app - that will let them log-in directly to a voting ‘dashboard’ - using thumbprint or facial recognition. There, they’ll be able to see everything they need to cast their votes right then and there…and do it!
The biggest news…every single bank and broker client of Broadridge will be covered (at no additional cost to them)…and no need for passwords or individual “control numbers” once you are set up. The app will also let you sign up for alerts when there are un-voted positions…and will allow reminders - with all the relevant materials - to be “pushed” to your phone on a schedule you can set up for yourself.
It pains us to mention this, since your Editor in Chief was a former transfer agency head himself, and still loves the business, and the many great people in it - but for transfer agents, the Broadridge offerings represent a serious “existential threat” to a core part of their business: For public companies, the Annual Meeting is the most important part of the transfer agency “value proposition” - by far.
No wonder, we guess, that all of the big-four TAs are looking to branch out in so many other ways…and to “transform” their infrastructure - and perhaps their fee structures too - to better cope with a 21st century environment…so do read on…
AT COMPUTERSHARE:
Computershare, like most of the four major TAs, had a pretty good year in 2018, with overall revenue up a healthy 9.7%. While revenue in its U.S. Registry Service declined by a basically negligible $1.3 million ( - 0.2 AU$), revenues from U.S. Corporate Actions jumped 26% (!) or just shy of 33 million AU$…And Stakeholder Records Management (basically its proxy solicitation business) increased by $14 million - due to proxy work for “a large US Fund” in the 1st quarter of 2018. Meanwhile, its cost-cutting initiatives, mostly in the shareholder servicing units, booked savings estimated at 49.4 million, and CPU saw its earnings on balances left on deposit grow (even though WE can’t figure out why so many corporate treasurers seem to be OK leaving so much money there for free) which also improved their overall margins very nicely.
In November of 2018, CPU’s parent company completed the acquisition of Equatex Group Holding AG - “a leading European employee share plan administration business headquartered in Zurich. Equatex was formerly the European share plans business of UBS. The business provides equity compensation administration services to 160 clients servicing over 1.1 million share plan participants. Equatex has an innovative range of scalable technologies and client solutions. The acquisition enhances Computershare’s Employee Share Plans client base, product suite, capabilities and position in key European markets.” (Interestingly, this is a space that CPU largely abandoned in the U.S. many years ago - selling it off to Merrill Lynch - except for the low-tech, relatively low-margin, payroll-driven Employee Stock Purchase Plan business…But maybe things will change now. For more information about this suddenly “hot space” see our article on Global Employee Plan servicing developments elsewhere in this issue.)
Most of interest to our readers, perhaps; after a rather long vacant space, following the retirement of Jay McHale in mid-2018, Computershare has named Jennifer Warren as its Head of U.S. Issuer Services: Warren is the former head of the US Region for CIBC (the Canadian Imperial Bank of Commerce) where she worked for 11 years. During the last four of those she led CIBC’s businesses in the US, including broker-dealer operations, wealth management, corporate banking and capital markets. Earlier, Jennifer served in senior legal positions at CIBC as well as Rogers Communications in Canada and currently serves as corporate director of the Granite Real Estate Investment Trust. She is also an Entrepreneur Mentor with New York City’s Fintech Innovation Lab.
A special shout-out to Computershare is due here - for the very fine way they followed up on our article in the last issue, describing an outrageous offer by “mini-tender firm” Baker Mills to purchase shares of CPU client Principal Financial Group - at a whopping 20% discount from the market price on the day of the offer - while not disclosing that Computershare’s own DRP would allow many if not all of these same shareholders to sell shares through them - at the market price. This would save your editors’ family members roughly $3,000 vs. taking the Baker Mills deal if they DID want to sell.
Just as we were set to go to press, our family members - who have gotten yet another offer from Baker Mills since our last issue - got a DRP statement with a very eye-catching insert from CPU: “Heads up: Recent unsolicited offers to buy PFG, Inc. common stock” - noting that “Principal is not associated in any way with Baker Mills, its offer or its documents…You are not obliged to accept the offer or to respond to Baker Mills”… and a recommendation that “you carefully review any such offer…and compare the offer price to the current market value of PFG common stock”…And, on the back, the form noted that investors can “Sell a portion or all of your shares at market price”…by calling CPU’s toll-free number.
AT EQ:
EQ - the company that purchased the Wells Fargo Shareowner Service business last year - formally announced in January “its strategic entrance into the proxy solicitation market” as we had predicted in our last issue. This, their press release says, “supports EQ’s growing capabilities as a global organization under Equiniti Group plc (LON: EQN) and Equiniti’s successful proxy solicitation and corporate governance advisory business, Boudicca Proxy. EQ now offers a full suite of proxy services, including proxy solicitation and consultation for annual meetings, special meetings and conversions, information agent services for corporate actions, and market and shareholder intelligence services. Clients who want a deeper or ongoing look at their shareholder base can retain their intelligence services year round or on a project basis for specific instances like ownership identification, peer analysis and debt identification. EQ Proxy is led by Rudy Muzik, founding partner of Market Intelligence Group prior to its acquisition by Okapi Partners, and Tom Cronin, former Senior Vice President of Business Development, Laurel Hill Advisory Group.”
We wish our many friends at EQ all our best in this new venture. And, while Rudy Muzik is an unknown tune to us so far, his fans at EQ speak highly of him. We do, as we have mentioned before in this space, know and think very highly of Tom Cronin, who is very well-known in the small-company world - and especially in the small-bank space, where we think M&A activity will be heating up big-time.
But full-fledged proxy solicitation will be very hard space to break into successfully, we think: There is a very overcrowded field now - that already has so many true superstars at the biggest firms - who instantly pass the “lifeboat test” that we have long said is, or should be, the deciding factor in selecting a solicitor.
(Please see the brief history elsewhere in this issue of the many twists and turns - and some sudden falls-from-grace of many old-time firms - but also the many sudden successes of super-savvy newcomers in this fascinating - and still changing business.)
And guess what else is new? EQ too is entering the private company market in the U.S. - announcing “the expansion of its M&A Paying Agent Services to private companies. This service is a natural extension” the press release says, “of the robust corporate actions EQ executes for large public companies annually. EQ processes an average of 20 million transactions each year, and has experience managing private deals. With their depth of expertise, the EQ team is proud to bring M&A Paying Agent Services to the broader market.”
As noted, this space has been getting mighty crowded all of a sudden…But we were very happy to learn that EQ has recently “insourced” all of the complex - and highly risky Reorg work - that had been previously outsourced by WFB to a small competitor with a mere fraction of EQ’s big and savvy staff - and its strong financial resources - as an important safety net.
M&A and Paying Agent Services are, by far, the riskiest businesses a transfer agent typically engages in…So all potential buyers of such services need to shop with special care, and pay special attention, we advise, to staff knowhow and experience, to the systems that are in place - with cybersecurity measures a major area of importance - to the errors and omissions insurance in force - and to the overall ability of an agent to “make good” if there is a major operational snafu, a cyber-fraud or an employee defalcation along the way. Historically, there have been some monster foulups here.
In a related development, we assume, Equiniti Group, “the multinational provider of payment and administration services,” recently announced “the appointment of James (“Jim”) Groenewold as Executive Vice President. Jim joins EQ from TCF Bank, a major regional bank, where he was EVP and Chief Financial Officer of its leasing companies. He has over 29 years of business experience working for big brands such as Cargill, General Electric and St Jude Medical.”
Still more beefing-up at EQ - Adam E. Burke, a long-term senior exec at U.S. Bank - where, according to his LinkedIn profile, he had been responsible for $400 million of revenue - has been appointed Executive Vice President - Relationship Management at EQ, replacing former head of U.S. Relationship Management Robert Hoke.
Tom Kies, who has served a stint - and sometimes two - at virtually all of the “old-line” proxy solicitation firms - including the “Old Manny Hanny” firm, where he was our first recruit - has just signed on as Executive Vice President with EQs new proxy firm, which bolsters their roster significantly.
We need to add one more important update to our previous reporting on EQ; they have now decided that they will indeed have to “convert” all of the old WFB shareholder records to a totally new system, now under rapid development we have been told.
We shudder when we recall the records-conversion efforts of the old and aptly-named “Chemical Mellon” joint venture in the mid-1990s - which caused widespread inconvenience - and outright outrage - among clients and shareholders alike - and which led to the loss of hundreds of millions of dollars in re-work and make-good efforts - and an extensive loss of business. We also recall the sudden and equally disruptive records-conversions at “the old Computershare” just a few years later…
So we are favorably impressed that EQ has quickly understood and ruled out the risks of trying to use - or to “retrofit” - old and/or non-U.S. based systems in today’s cyber-driven world - and that they seem to know exactly what they need to do - and to guard against - as they go forward. We wish them all our best!
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