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ISS A/S: The 124-Year Journey from 20 Night Watchmen to Global Facility Services Giant
I. Introduction & Episode Roadmap
Picture this: It's 1901 in Copenhagen. Gas lamps flicker on cobblestone streets, and the industrial revolution is reshaping Danish society. In a modest office, 20 night watchmen prepare for their evening rounds, checking padlocks and keeping vigil over merchant properties. None could have imagined that their humble security operation—Kjøbenhavn-Frederiksberg Nattevagt (Copenhagen-Frederiksberg Night Watch)—would evolve into one of the world's largest employers, with over 350,000 people cleaning offices in Sydney, serving hospital meals in São Paulo, and maintaining telecommunications infrastructure in Munich.
ISS A/S (International Service System) is a facility management services company founded in Copenhagen, Denmark in 1901. ISS's core services include security, cleaning, technical, food and workplace. The ISS Group's revenue amounted to DKK 69.823 billion in 2020 and ISS has nearly 400,000 employees and activities in countries across Europe, Asia, North America, Latin America and the Pacific.
How did a small Scandinavian security company become a global colossus in what many consider the most "invisible" industry in business? The story of ISS offers a masterclass in the art of scaling commoditized services, surviving the private equity crucible, and managing what may be the most human-capital-intensive business model imaginable.
ISS has always been a people business, ever since it was founded in 1901. For the past 122 years, the DNA of the company has been to grow and develop people. Its belief has always been that its people add a human touch to create places that deliver experiences and productivity—whether in cleaning, food services or workplaces.
The themes that emerge from this 124-year saga are profound: How do you build competitive advantage in businesses where the barriers to entry appear minimal? What happens when private equity titans like EQT and Goldman Sachs take a labor-intensive services company private—and hold it for nearly a decade? How does a half-million-person organization survive when COVID-19 empties every office building it services overnight? And what does it mean to build "belonging" in a company that hires 125,000 new employees every single year?
Annual revenue of ISS FS Integrated Solutions is 83.8B DKK as on December 31, 2024. The company today operates across 30+ countries, yet remains deeply rooted in what it calls "Scandinavian values"—equality, fairness, and openness. This tension between global scale and local intimacy defines ISS's strategic DNA.
Facility services may seem mundane—cleaning, catering, security, maintenance—but these "invisible" operations form the essential economy behind every workplace, hospital, and airport on the planet. Without them, nothing works. And ISS has spent 124 years perfecting the art of making nothing go wrong.
II. Origins: Scandinavian Values & The Night Watch (1901-1970s)
The Founding Story
The year 1901 marked a turning point for Copenhagen. Denmark was industrializing rapidly, and with new factories, warehouses, and commercial properties came the need for protection. The company was founded in 1901 in Copenhagen, Denmark as a small security company with 20 night watchmen named København-Frederiksberg Night Watch. These weren't security guards in the modern sense—they were watchmen who walked the streets at night, checking that doors were locked, fires hadn't broken out, and property remained secure.
The business model was elegantly simple: property owners paid a monthly fee, and watchmen made their rounds. But embedded within this simplicity was a principle that would define ISS for more than a century—service delivered through people, person by person, site by site.
The early decades saw steady growth as Copenhagen expanded. The company developed a reputation for reliability and trustworthiness—traits that resonated deeply with Danish business culture. The night watchmen weren't just contractors; they became known fixtures in the neighborhoods they protected.
The Pivot to Cleaning (1934)
Three decades into its existence, the company made a pivotal strategic decision that would reshape its entire trajectory. The company created an important new subsidiary, Det Danske Rengørings Selskab A/S (The Danish Cleaning Company, or DRS), in 1934. At first, DRS had 43 employees and just two customers.
The expansion from security to cleaning wasn't accidental—it was logical. The same property owners who needed night watchmen also needed their offices cleaned. The same relationships of trust that underpinned security services applied equally to cleaning. By bundling services, the company could deepen customer relationships while spreading overhead costs.
This 1934 pivot established a template ISS would follow repeatedly: enter adjacent service categories where existing customer relationships provided entry, where the core competency (managing distributed labor forces across many sites) remained relevant, and where the Danish commitment to quality and training could create differentiation.
Early Internationalization
Then, in 1943, the company ventured out of Denmark and established offices in Sweden. Soon, the group had 2,000 employees. The move to Sweden—first step in what would become truly global expansion—reflected both opportunity and necessity. Denmark was small; to achieve real scale, ISS needed to look beyond its borders.
The Nordic expansion continued methodically. A Norwegian subsidiary followed in 1952. The group expanded into Germany in 1965 and Switzerland in 1967. ISS expanded into Austria and Spain in 1971, at the same time that it acquired part of Servi Systems Oy. It began expanding overseas in 1973 and its global revenue surpassed 1 billion DKK in 1975.
ISS went public in 1977 when its shares were listed on the Copenhagen Stock Exchange. The IPO provided capital for continued expansion while introducing the discipline of public market scrutiny.
The U.S. Entry & Scandal
The firm takes a major stake in the New York-based Prudential Building Maintenance Corp in 1979. The American market represented the biggest prize in the global cleaning industry—but it would prove treacherous terrain.
By 1989, the total number of employees under the Group reached 100,000. ISS had achieved genuine global scale, with operations spanning multiple continents and service categories. But growth masked trouble.
The U.S.-based arm of the company was merged and sold off in 1995 after the discovery of about a decade of accounting irregularities. The scandal was a sobering reminder of the challenges inherent in managing far-flung operations in a labor-intensive business where margins were thin and the temptation to cut corners ever-present. The U.S. exit, while painful, demonstrated that ISS would prioritize integrity over growth—a decision that would enhance its reputation in the long run.
For investors, the early history reveals critical lessons about ISS's DNA: a willingness to make strategic pivots (security to cleaning), disciplined geographic expansion (Nordic first, then broader Europe), and a commitment to ethical standards even when it meant retreating from major markets. These traits would prove essential during the volatile decades ahead.
III. Building the World's Largest Cleaning Company (1980s-2004)
The Poul Andreassen Era
Waldemar Schmidt, company veteran of 20 years (mostly outside Denmark), took over as chief executive in late September 1995. His predecessor, Poul Andreassen, was credited with building ISS into the world's largest cleaning business in his 33 years leading the company.
Andreassen's tenure represented an extraordinary feat of institution-building. Over three decades, he transformed a regional Scandinavian services company into a global powerhouse. Poul Andreassen came from SAS (Scandinavian Airline Systems), where he had worked with time studies and rationalization programmes. Poul Andreassen retired in 1995 as the CEO of ISS.
His background in airline operations—one of the world's most process-intensive industries—proved directly applicable to professional cleaning. Andreassen brought systematic thinking to an industry that had been largely informal: standardized training programs, documented procedures, quality metrics. This "industrialization" of cleaning services became ISS's core differentiator.
The Unique People Model
What set ISS apart from competitors wasn't just operational excellence—it was a fundamentally different approach to human capital. ISS is unusual among cleaning companies in that it maintains friendly relationships with trade unions, and offers its blue collar employees something of a career ladder. The group claimed to reap such rewards as low turnover and better quality service through these progressive practices.
In an industry notorious for treating workers as disposable, ISS invested in training, career progression, and employee welfare. In 1995, ISS set out to form a consultative works council for its employees, borrowing a practice from the world of manufacturing. Such gestures were made in the name of ultimately producing a greater number of clients and increasing shareholder value via higher employee morale and lower turnover. They also eased resistance from labor unions in the United Kingdom when the group sought public sector cleaning contracts.
This wasn't altruism—it was strategic calculation. Cleaning services are delivered face-to-face, day after day, in intimate proximity to customers' employees. A demotivated, high-turnover workforce delivered inconsistent service that damaged customer relationships. By investing in workers, ISS could charge premium prices and retain clients longer.
An employee share scheme was successfully introduced. In 1986, about 4,000 employees became co-owners of ISS. The employee ownership program reinforced the message that ISS workers weren't just costs to be minimized—they were stakeholders in the company's success.
Strategic Transformation: From Cleaning to Multi-Services
The late 1990s saw ISS make another strategic leap. Having mastered cleaning, the company began bundling additional services—catering, security, maintenance—into integrated packages. The strategy "aim2002" was launched, focusing on Multi Services: selling multiple services to the same customer.
In 1999 ISS acquired Abilis, the second largest European provider of cleaning and specialised services, in a DKK 3.6 billion acquisition, the Group's largest ever. Abilis had about 50,000 employees and annual revenues of 5.2 billion DKK in 1998. The total number of employees in the Group reached 200,000 in 1999, doubling in just 10 years.
The Abilis acquisition was transformational—doubling headcount in a single stroke. After the Abilis acquisition, ISS had a total of 195,000 employees in more than 70 companies in 32 countries and was a market leader in Europe and Asia. Eric S. Rylberg was named CEO in an August 2000 restructuring. ISS continued to expand rapidly, acquiring 53 companies in 2000 alone.
This acquisition-fueled growth created a virtuous cycle: greater scale enabled better purchasing on supplies and equipment, broader geographic coverage allowed ISS to serve multinational clients across borders, and multiple service lines created cross-selling opportunities that deepened customer relationships.
A new five-year strategy "create2005" was launched, introducing the Facility Services concept. The vision was clear: evolve from selling individual cleaning or catering contracts into becoming a comprehensive facility services partner managing all non-core operations for corporate clients. This "Integrated Facility Services" (IFS) model would become ISS's competitive signature.
By 2004, ISS had established itself as the global leader in cleaning services and a rising power in broader facility management. Revenue had grown dramatically, the employee base exceeded 300,000, and operations spanned more than 40 countries. The foundation was set for the next chapter—one that would test the company's resilience as never before.
IV. The Private Equity Chapter: EQT & Goldman Sachs Take ISS Private (2005-2014)
The 2005 Buyout
On a crisp Copenhagen morning in March 2005, the financial world took notice of a massive bet on facility services. EQT III and EQT IV ("EQT") and GS Capital Partners 2000, L.P. and certain affiliated funds ("Goldman Sachs Capital Partners"), through PurusCo A/S, a newly formed Danish company, made a voluntary conditional public tender offer for the total outstanding share capital of ISS A/S. The Consortium intended to delist ISS from the Copenhagen Stock Exchange and further develop ISS as a private company.
The Offer Price represents a premium of approximately 49% relative to the average ISS share price over the last 12 months. ISS' largest shareholder, Franklin Templeton, irrevocably undertook to accept the Tender Offer in respect of their entire shareholding of 9.1% of ISS' issued share capital.
Following a successful completion of the Tender Offer, PurusCo would be approximately 55% directly or indirectly owned by EQT and approximately 45% by Goldman Sachs Capital Partners.
The transaction valued ISS in a leveraged buyout in 2005. That deal valued the business at $5.3 billion including debt. Why would two of the world's most sophisticated private equity firms pay a 49% premium for a cleaning company?
The thesis was multi-layered. First, facility services enjoyed predictable, recurring revenues—corporations needed their offices cleaned regardless of economic conditions. Second, the industry remained highly fragmented, with consolidation opportunities in nearly every market. Third, ISS had demonstrated the ability to evolve from single-service cleaning into comprehensive facility management, where margins were higher and customer relationships stickier. Fourth, emerging markets—particularly in Asia—represented vast untapped opportunity.
Aggressive Growth Under PE Ownership
Under private equity ownership, ISS shifted into aggressive expansion mode. The next year, the second-largest acquisition in company history was made when ISS acquired the outstanding 51% of the shares in Tempo Services in Australia. In 2007, it expanded its portfolio in the United States through the acquisition of Sanitors Inc.
By 2010, ISS's revenue had passed 70 billion DKK and its total number of employees had reached 500,000. Since the buy-out in 2005, ISS had roughly doubled its revenue, profit, number of employees, and exposure to emerging markets. In the same period, ISS increased the number of significant international Integrated Facility Services contracts from 2 to 11.
The growth was remarkable—but it came with leverage. Like most PE-backed companies, ISS carried substantial debt to finance the buyout and subsequent acquisitions. In the low-interest-rate environment of the mid-2000s, this seemed manageable. Then came the 2008 financial crisis.
The Failed IPO Attempt (2011)
By 2011, EQT and Goldman Sachs were ready to exit their investment. An IPO seemed the natural path. The offering was prepared, roadshows conducted, and Copenhagen was set to welcome one of its largest listings in years.
Then it collapsed. It is only eight months, however, since EQT and Goldman Sachs Capital Partners pulled a ÂŁ1.55bn float in Copenhagen at the eleventh hour. Market conditions had deteriorated, investor appetite for leveraged companies had evaporated post-crisis, and the pricing couldn't be achieved.
The G4S Mega-Merger Drama (2011)
With the IPO shelved, an alternative exit materialized—one that would have reshaped the entire industry. On 17 October 2011, G4S announced it would purchase the Denmark-based facilities management group ISS for £5.2 billion. The acquisition would have created the world's largest facilities management company.
The industrial logic was compelling. G4S, the British security giant, could combine with ISS to create an unmatched integrated services powerhouse. The deal would create synergies, eliminate overlap, and establish dominant market positions globally.
Within two weeks, the deal was dropped due to lack of shareholder support. G4S's chief, Nick Buckles, recounted the events of the failed acquisition, which cost the company tens of millions of dollars, as "one of the most bruising experiences of my life." A combination of institutional investors who led the response and the minority shareholders who followed, objected to a variety of factors, not the least of which was the additional leverage and debt the deal would introduce to G4S's balance sheet.
The G4S drama illustrated the challenges of executing mega-deals in uncertain times. "We believe that developing our business towards an enhanced security and integrated facilities services model is the way forward in the longer term and we saw ISS as an excellent opportunity to achieve this aim. However, following the announcement of the Acquisition, shareholders have raised concerns particularly over its scale and perceived complexity against the backdrop of current macro-economic uncertainty."
For EQT and Goldman Sachs, it was back to the drawing board. Their investment, now six years old, remained trapped.
Strategic Investors Join (2012)
Salvation came from an unexpected direction—the investment arm of Danish toy legend LEGO. Global long term investors Ontario Teachers' Pension Plan (Teachers') and KIRKBI Invest A/S agreed to invest EUR 500 million (approximately DKK 3,721 million) in ISS, a leading global provider of facility services. The current owners, funds advised by EQT Partners and GS Capital Partners funds, were not selling any shares as part of the transaction, and would remain majority owners of ISS.
The new investors would own approximately 26% of the ultimate holding company of ISS, with funds advised by EQT and by GSCP continuing to hold a majority interest in the business. The final price corresponds to DKK 105 per share in ISS A/S.
KIRKBI Invest is owned by KIRKBI A/S which is the Kirk Kristiansen Family's holding- and investment company with activities within 3 areas: 75% ownership of LEGO, 36% ownership of Merlin Entertainments and among other things a number of investments in bonds, listed and unlisted equities, and real estate.
The proceeds from this investment were expected to be used to significantly deleverage the company by repaying the 11% Senior Notes due 2014 after the December 2012 call date.
The KIRKBI and Ontario Teachers' investment was strategic brilliance. It brought in patient, long-term capital (a pension fund and a family office) to partially refinance the debt load, validating ISS's value while giving the PE sponsors time to prepare a proper exit. The new investors provided credibility and alignment—neither would pressure for a hasty sale.
"We have been following the performance of ISS for several years. ISS is a well-run company with strong values and leadership principles. We believe ISS is well positioned for further growth, particularly in emerging markets," said Søren Thorup Sørensen, CEO of KIRKBI A/S.
V. Return to Public Markets: The 2014 IPO
Denmark's Largest IPO in Two Decades
Third time proved the charm. After the failed 2011 IPO and the collapsed G4S merger, ISS finally returned to public markets in spectacular fashion. ISS was listed on the OMX Nasdaq Copenhagen Stock Exchange in 2014 in Denmark's largest IPO in two decades.
ISS, one of the world's leading facility services companies, announced the final offer price of DKK 160 per share in connection with the completion of its Initial Public Offering. Admission to trading and official listing on NASDAQ OMX Copenhagen of the ISS shares took place on 13 March 2014, under the symbol "ISS".
Offer price was fixed at DKK 160 per offer share, giving ISS a market capitalisation of DKK 29.6 billion excluding any treasury shares held by ISS. 50,224,907 new shares were issued by ISS, raising gross proceeds of approximately DKK 8,036 million.
Due to strong demand from investors, ISS made an early close of the offering on March 12. The shares began trading on March 13 on the NASDAQ OMX Copenhagen exchange at a price of DKK 160.
PE Exit & Value Creation Analysis
The question investors always ask about PE-backed IPOs: Was value actually created, or merely redistributed?
The private equity firms had held ISS for nearly nine years—an eternity by PE standards. Goldman Sachs Capital Partners and EQT Partners AB sold shares for 4.05 billion kroner ($674 million) in ISS A/S, the world's biggest cleaning company, cutting their stake a second time since the initial public offering.
On September 9, 2014, EQT funds and GS PIA placed 31 million shares through an Accelerated Book Building (ABB).
What did nine years of PE ownership change? The transformation was substantial. ISS evolved from a cleaning company with some ancillary services into a global integrated facility services provider. The shift to IFS contracts—where ISS managed all facility needs for a client—represented a fundamental business model evolution. Revenue mix shifted toward emerging markets, which grew from modest contributions to nearly a quarter of group revenue. The key account strategy intensified, with ISS focusing on large multinational clients who valued a single partner across geographies.
The leverage that nearly sank the company became manageable through the KIRKBI/Ontario Teachers' investment and disciplined cash generation. By IPO time, the balance sheet was healthier, though still carrying meaningful debt.
The verdict: genuine transformation occurred, but the extended hold period suggested the returns weren't spectacular by private equity standards. The failed G4S deal and pulled IPO cost years of opportunity cost. Still, a DKK 29.6 billion market cap against the original €2.9 billion acquisition price suggested solid, if not home-run, returns.
For the newly public ISS, the IPO represented liberation—freedom from PE debt pressures and the opportunity to pursue a long-term strategy with patient public shareholders.
VI. The Jeff Gravenhorst Era: Integrated Facility Services Strategy (2010-2020)
A Decade of Transformation
Jeff Gravenhorst represented institutional continuity in an industry often marked by revolving-door leadership. Jeff Gravenhorst joined ISS in 2002, becoming CEO in 2010. During that time, he led the company through a major transformation, under both private and public ownership, shifting ISS's focus towards key accounts.
Gravenhorst's strategy centered on "The ISS Way," built on four strategic cornerstones: customer focus, people management, the IFS strategy, and a multi-local approach. The philosophy reflected ISS's unique position—a truly global company where service delivery happened locally, one building at a time.
The IFS Strategy
The evolution from single-service cleaning to full facility management represented ISS's core strategic bet. The premise was straightforward: corporations increasingly wanted to outsource all non-core facility operations to a single partner rather than managing multiple vendors.
For ISS, IFS contracts offered multiple benefits: - Higher margins: Integrated contracts commanded premium pricing - Longer relationships: Multi-year IFS contracts with significant switching costs - Cross-selling: Entry through cleaning could expand to catering, security, and technical services - Data advantages: Managing entire facilities generated insights that improved service and locked in relationships
The company's services catered to office-based and production-based customers across industries including financial services, aviation, professional services, technology, life sciences, industry and manufacturing, and healthcare. ISS operated across geographic regions including Northern Europe, Central & Southern Europe, Asia & Pacific, and the Americas.
The Deutsche Telekom Crown Jewel
The pinnacle of the IFS strategy came in 2017. Once fully operational, the partnership would become the largest contract within the ISS Group. ISS announced a ten-and-a-half-year contract with Deutsche Telekom.
The company signed its largest customer agreement in its history in 2017 with Deutsche Telekom, covering approximately 9,000 sites across Germany, more than 6,000 employees and about 4% of Group revenue.
ISS Group CEO Jeff Gravenhorst said: "This is the single-biggest contract in ISS' history and we are very proud of the trust Deutsche Telekom shows us with this contract. This is an excellent example of an outcome-based partnership, where we will work closely with our customer to ensure a reliable, transparent and high-quality service setup."
The package of contracts includes several ten-year contracts with Deutsche Telekom subsidiaries. The partnership covers facility services for several thousand buildings, antennas, towers, masts and other technical assets. More than 6,000 ISS employees would be providing services for Deutsche Telekom.
The Deutsche Telekom contract represented both ISS's greatest triumph and, as would become clear, one of its most challenging engagements. Managing telecommunications infrastructure across 9,000 sites—including critical network assets—demanded operational excellence of the highest order.
Key Account Focus
Over the last twelve months of the Gravenhorst era, ISS won significant new contracts such as the United Kingdom Foreign Commonwealth Office, Statoil, Shanghai Pudong International Airport, New South Wales Government Schools, Tesco, and Philip Morris International.
These wins demonstrated ISS's ability to serve the most demanding clients in the most complex environments—airports where security failures made headlines, hospitals where hygiene lapses cost lives, corporate headquarters where executives judged service quality daily.
By 2019, ISS had achieved global revenue amounting to DKK 78.6 billion. The company employed nearly half a million people worldwide and stood as the undisputed global leader in integrated facility services. Gravenhorst had successfully navigated the transition from PE ownership to public markets while maintaining strategic focus.
Then came 2020.
VII. COVID-19 Crisis & The OneISS Transformation (2020-Present)
The Perfect Storm
The year 2020 brought a convergence of crises that would test ISS as never before. On 17 February 2020, ISS was the target of a malware attack. As a precautionary measure and as part of our standard operating procedure, the company immediately disabled access to shared IT services across its sites and countries, which ensured the isolation of the incident.
February 17, 2020, 4 o'clock in the morning, the Danish facility firm ISS was hit by a ransomware attack. An attack that has changed the company ever since.
The cyberattack disabled systems across a 500,000-person organization—payroll, invoicing, communications all compromised. But worse was coming. Within weeks of restoring IT systems, COVID-19 began sweeping across the globe. For a company whose business depended on occupied office buildings, the pandemic represented an existential threat.
Leadership Transition
ISS announced that Jeff Gravenhorst was to retire and would step down as CEO after 10 years in the role. He was succeeded by Jacob Aarup-Andersen, who took up the position on 1 September 2020.
Jacob Aarup-Andersen was appointed new Group CEO after a global search. He had been a member of the Executive Leadership team of Danske Bank A/S since 2016. He last served as Head of the Danish banking division having previously been Chief Financial Officer. Danske Bank is one of the largest banks in Scandinavia. He started his career with Goldman Sachs in London in 2002.
Aarup-Andersen brought financial rigor and transformation experience—precisely what ISS would need. Jacob Aarup-Andersen (born 6 December 1977) is a Danish businessman. He earned a master's degree in economics from the University of Copenhagen in 2002. From 2002 to 2012, he worked in London for Goldman Sachs, Highbridge Capital and Montrica Investment Management.
COVID-19 Impact
"I have been thoroughly impressed by how all my ISS colleagues across the world have handled an immensely challenging start to 2020," he stated in his speech referring to the IT malware attack and the Covid-19 pandemic. "Your response has been nothing short of phenomenal, demonstrating the amazing power of our people, our values and our brand."
The pandemic's impact on ISS was complex. Offices emptied worldwide, decimating demand for traditional cleaning and catering. But healthcare facilities surged with activity, requiring enhanced cleaning and disinfection. Corporate clients, though reducing space, demanded more intensive sanitation protocols. Aviation ground to a halt, then gradually recovered.
In ISS's results for the nine months to 30 September 2020, the Denmark-based group said sales dropped by 8.1% to DKK 53.1bn (€7.1bn), blaming operational setbacks related to coronavirus from the second half of March 2020. Although a COVID-19-led pickup in deep-cleaning and disinfection work at clients' premises helped drive growth in some areas, activity related to food services was significantly reduced.
The OneISS Strategy Launch (December 2020)
In December 2020, Aarup-Andersen unveiled a comprehensive turnaround plan. The strategy—OneISS—created a "Stronger, Simpler, Closer ISS." It represented the start of a new journey, refocused and relentless in driving execution and delivering on the promise of the company's global strengths.
A new strengthened Executive Group Management team was assembled, comprising a strong mix of seasoned internal talent and external additions. Medium-term targets were withdrawn and replaced by new turn-around targets to focus on driving a fast recovery of profitability and cash generation.
The OneISS strategy outlined a clear recovery path back to a healthy and profitable business by end of 2022, thereby poised to embark on an even more ambitious agenda towards 2025. The strategy had four pillars: 1. Key segment focus: Concentrating on industries where ISS had clear competitive advantage 2. Technology investment: Modernizing operations through digital tools 3. Operational alignment: Streamlining the operating model for efficiency 4. Divestment program: Exiting non-core markets and businesses
Divestments & Portfolio Simplification
The divestment program became central to the turnaround. ISS systematically exited markets where it lacked scale or strategic positioning.
The divestment of ISS France was completed in April 2024 marking the final step in the strategic divestment programme.
The French exit was particularly significant—France had been a major market but one where ISS struggled to achieve acceptable margins. By focusing resources on stronger positions, ISS could improve overall profitability.
Financial Turnaround
The results vindicated the strategy. Improvements in underlying margin were realised, and ISS was well on track to deliver the targeted operating margin of above 5% in 2024.
Organic growth was expected to be around 9%.
CEO Departure to Carlsberg (2023)
Then, another transition. ISS A/S announced that Group CEO Jacob Aarup-Andersen submitted his resignation to the Board of Directors as he accepted a new position as CEO of Carlsberg Group. ISS initiated a search for a new Group CEO.
Commenting on the resignation, Niels Smedegaard, Chair of the ISS Board of Directors, said: "Although we regret Jacob's decision to leave the company, ISS is now in a much stronger position compared to a few years back. We have a solid strategic, commercial, and operational foundation and a strong leadership team to continue the execution of the OneISS strategy."
ISS A/S announced—after a rigorous internal and external search process over the past three months—the appointment of Kasper Fangel as the company's new Group CEO, effective 1 September 2023. This appointment came after the resignation of Jacob Aarup-Andersen in March, and it marks an important milestone in ISS's continued growth and strategic execution of its OneISS strategy. With a distinguished track record in the industry and current Group Chief Financial Officer of ISS, Kasper brought a wealth of experience and expertise to this new role.
Kasper is the current Group Chief Financial Officer at ISS and has been with the company since 2008.
The Deutsche Telekom Dispute
One major overhang remains. The Deutsche Telekom contract—ISS's largest—has become the subject of a significant dispute.
Free cash flow was DKK 2.0 billion in 2024 (2023: DKK 1.8 billion), adversely impacted by around DKK 600 million from Deutsche Telekom withholding certain payments related to the ongoing dispute.
ISS, DT's facilities management supplier in Germany, updates on long-running disagreement centring on major, long-term deal gained with operator in late-2010s. Danish outsourcer caveats cash flow forecast for FY25 amid uncertainty over proceedings' outcome. Final arbitration hearing now tabled for July.
The arbitration process with Deutsche Telekom progressed according to plan, and the final oral hearing in the arbitration proceedings is scheduled to take place in mid-July 2025.
Current Position (2024-2025)
Organic growth was 6.3% in 2024 (2023: 9.7%), mainly driven by price increases implemented across the Group, positive volume growth and higher than expected above-base work revenue in the US. Operating margin before other items in 2024 improved to 5.0% (2023: 4.3%) as a result of broad-based operational improvements across the Group.
In 2024, Group revenue was DKK 83.8 billion.
Financial leverage end of 2024 at 2.0x, in the low end of the target range from 2.0x – 2.5x. On 19 February 2025, ISS concluded the share buyback programme of DKK 1.5 billion announced in February 2024 and announced the initiation of a new share buyback programme of DKK 2.5 billion.
For 2025, organic growth is expected to be 4 – 6% and operating margin is expected to be above 5%.
In 2024, ISS conducted a review of the OneISS strategy confirming the overall direction but updating the strategic priorities. In January 2025, Executive Group Management was aligned with the updated priorities and reduced to five members.
VIII. Playbook: Business Lessons from ISS
The People-First Model at Scale
To put things into perspective, ISS global today is a business with more than 350,000 people – and we hire 125,000 new employees every year due to the high turnover in the industry.
This statistic is staggering. ISS essentially rebuilds a third of its workforce annually. Managing this "people machine" represents the company's core competency—and its greatest challenge.
The economics are brutally simple: labor costs dominate the P&L in facility services (typically 70-80% of revenues). A few percentage points improvement in retention, productivity, or scheduling efficiency flows directly to the bottom line. ISS's historical commitment to training, career progression, and worker welfare isn't idealism—it's competitive strategy.
More and more we see requests for proposals from big corporate clients specifying the importance of DEI. While our competitors haven't prioritised this as much, we can really see that this has become one of our unique selling points tied to our key account structure and business model of self-delivery.
The Evolution from Single Service to IFS
ISS's transformation from cleaning company to integrated facility services provider illustrates a classic strategy: bundling commodity services into integrated solutions to escape price competition.
Single-service contracts (cleaning only, catering only) face intense competition—barriers to entry are low, and customers can easily switch providers. Integrated contracts, where ISS manages all facility needs, create switching costs through integration complexity and accumulated institutional knowledge.
The margin expansion is measurable: IFS contracts consistently deliver higher margins than single-service work while requiring fewer sales resources to maintain.
M&A Discipline: 100+ Acquisitions
ISS has completed more than 100 acquisitions over its history, developing a repeatable playbook for integrating labor-intensive businesses:
- Cultural alignment: Target companies with compatible values and management practices
- Operational integration: Standardize processes, systems, and training immediately
- Multi-local execution: Maintain local market knowledge while extracting global synergies
- Patient capital: Allow time for integration to generate returns
The recent acquisitions reflect this discipline: In 2024, ISS strengthened its presence in Switzerland and Spain through two smaller, local bolt-on acquisitions of gammaRenax and Grupo BN, respectively. These acquisitions reflect a clear and disciplined approach to M&A: they have a strong strategic fit, a country-wide footprint, and generate operational synergies for ISS.
Surviving Private Equity Ownership
ISS's nearly nine-year journey under EQT and Goldman Sachs ownership offers lessons for any company facing leveraged ownership:
- Operational excellence becomes existential: With debt service consuming cash flow, there's no room for operational underperformance
- Strategic patience is possible: The KIRKBI/Ontario Teachers' investment bought time when exit options evaporated
- Transformation requires runway: Real business model evolution—like ISS's shift to IFS—takes years, not quarters
- Exit timing matters enormously: The failed G4S deal and pulled IPO demonstrate that even strong businesses can be trapped by market conditions
Crisis Management: COVID as Catalyst
ISS's response to the 2020 crisis—cyberattack followed by pandemic—illustrates how existential threats can accelerate necessary transformation:
- Portfolio pruning under pressure: Divestments that might have taken years happened in months
- Cost discipline: The crisis forced operational efficiency improvements across the organization
- Strategy clarification: The OneISS framework emerged from crisis-induced clarity about what ISS does best
- Customer relationship deepening: Supporting clients through crisis strengthened long-term partnerships
IX. Porter's 5 Forces & Hamilton's 7 Powers Analysis
Porter's 5 Forces Analysis
| Force | Assessment | Analysis |
|---|---|---|
| Threat of New Entrants | MODERATE | Low capital requirements for single-service players, but significant barriers for IFS (integrated facility services) due to need for multi-service capabilities, technology platforms, and global key account relationships |
| Supplier Power | LOW | Labor is the primary input; fragmented labor market gives ISS leverage; equipment and supplies are commoditized |
| Buyer Power | HIGH | Large corporate clients can negotiate aggressively; long contract cycles but tender processes are competitive; switching costs moderate for single services, higher for IFS |
| Threat of Substitutes | MODERATE-HIGH | In-house facility management teams remain a constant threat; technology-enabled automation for cleaning and security slowly emerging |
| Competitive Rivalry | HIGH | Fragmented industry with many regional players; price competition intense in commodity services; differentiation through IFS, technology, and quality |
ISS's main competitors include Accenture, Compass Group USA, Aramark, Sodexo, Quess Corp and ABM Industries.
Sodexo has been one of ISS's top competitors, also competing in the Facilities Management Services field. Sodexo generates 222% of ISS's revenue.
The competitive landscape reveals ISS's challenge: it competes against significantly larger rivals (Sodexo, Compass) while facing intense price pressure from regional players. Differentiation through IFS capabilities and the "people-first" model represents ISS's primary competitive response.
Hamilton's 7 Powers Analysis
| Power | Present? | Evidence |
|---|---|---|
| Scale Economies | âś… MODERATE | Procurement advantages on supplies/equipment; shared services (HR, IT, finance) across countries; however, labor-intensive nature limits scale benefits since service delivery remains local |
| Network Effects | ❌ WEAK | Minimal direct network effects; no multi-sided platform dynamics |
| Counter-Positioning | ✅ EMERGING | IFS model vs. pure-play competitors—single-service cleaning companies would face cannibalization risk if they tried to match ISS's integrated approach |
| Switching Costs | âś… MODERATE | Stronger for IFS clients (integration complexity, institutional knowledge); weaker for single-service contracts |
| Branding | âś… MODERATE | ISS brand represents quality and reliability in developed markets; less differentiated in emerging markets |
| Cornered Resource | ❌ WEAK | No proprietary technology or exclusive assets; human capital is differentiator but not cornered |
| Process Power | âś… MODERATE | Operational excellence in managing distributed workforce; training systems; quality control processes developed over 120+ years |
ISS's competitive position derives primarily from process power (operational excellence in managing massive distributed workforces) and moderate switching costs (particularly in IFS relationships). The lack of strong network effects or cornered resources explains why margins remain modest despite market leadership.
Industry Context
The global cleaning services market size reached approximately USD 74.27 billion in 2024. It is expected to witness further growth in the forecast period of 2025-2034, growing at a CAGR of 6.4% to reach around USD 138.11 billion by 2034.
The industry's growth trajectory is favorable, driven by: - Corporate outsourcing trends - Heightened hygiene awareness post-COVID - Emerging market development - Aging infrastructure requiring more maintenance
However, ISS's ability to capture growth depends on executing its IFS strategy while managing the fundamental challenges of a labor-intensive business model.
X. Investment Considerations: Bulls vs. Bears
The Bull Case
Market Leadership in Attractive Industry: ISS operates in a large, growing market with favorable structural trends. The shift toward outsourcing facility management continues globally, and post-COVID hygiene awareness has permanently elevated demand for professional cleaning services.
OneISS Transformation Delivering Results: The turnaround strategy is working. Operating margins have improved from pandemic lows to above 5%, divestments are complete, and the balance sheet is healthier with leverage at 2.0x—the low end of the target range.
Recurring Revenue Model: Facility services contracts provide predictable cash flows. Multi-year IFS agreements with major corporations create visibility that many businesses lack.
Shareholder Returns: On 19 February 2025, ISS concluded the share buyback programme of DKK 1.5 billion announced in February 2024 and today announces the initiation of a new share buyback programme of DKK 2.5 billion. Management is returning capital while maintaining financial flexibility.
People Advantage: In an era of increasing ESG focus, ISS's historical commitment to worker welfare and diversity represents genuine competitive differentiation that resonates with major corporate clients.
The Bear Case
Low-Margin Business Model: Operating margins around 5% leave little room for error. Any operational misstep—contract losses, wage inflation, productivity issues—flows directly to earnings.
Labor Intensity Creates Structural Challenges: With 350,000 employees and 125,000 new hires annually, ISS faces perpetual recruitment, training, and retention challenges. Labor shortages in developed markets pressure both costs and service quality.
Deutsche Telekom Overhang: The ongoing arbitration with ISS's largest contract creates uncertainty. Free cash flow is expected to be above DKK 2.4 billion excluding payments withheld by Deutsche Telekom and above DKK 3.0 billion assuming receipt of these payments in 2025. Resolution remains uncertain.
Competitive Intensity: Larger competitors (Sodexo, Compass) have greater scale and resources. Regional players undercut on price. The threat of in-sourcing never disappears entirely.
Technology Disruption Risk: While automation in facility services remains nascent, robotic cleaning, AI-powered building management, and other technologies could eventually disrupt the labor-intensive model.
Key Performance Indicators to Monitor
For investors tracking ISS, three metrics matter most:
-
Operating Margin: The critical profitability indicator in this thin-margin business. Target is above 5%; consistent delivery validates the OneISS transformation.
-
Organic Revenue Growth: Indicates market share trajectory and pricing power. Current 4-6% guidance reflects stable demand; acceleration would signal competitive momentum.
-
Free Cash Flow Conversion: Cash generation funds buybacks, debt reduction, and growth investments. The Deutsche Telekom dispute currently distorts this metric, making resolution particularly important.
Material Risks and Regulatory Considerations
Legal/Regulatory: The Deutsche Telekom arbitration represents the most significant near-term legal risk. Resolution—positive or negative—will meaningfully impact financials and management credibility.
Labor Relations: As a major employer across dozens of jurisdictions, ISS faces constant regulatory and labor relations complexity. Minimum wage increases, union negotiations, and employment law changes require ongoing management attention.
Currency Exposure: Operations across 30+ countries create significant foreign exchange exposure, though the diverse geographic footprint also provides natural hedging.
Accounting Considerations: ISS applies IAS 29 (hyperinflation accounting) in certain markets, which requires careful attention when analyzing reported results versus underlying performance.
XI. Conclusion: The Enduring Relevance of "Invisible" Services
From 20 night watchmen in 1901 Copenhagen to 350,000 "placemakers" spanning the globe, ISS's journey illuminates fundamental truths about building enduring businesses in services industries.
First, competitive advantage in commoditized services comes not from capital or technology, but from operational excellence—the accumulated knowledge of how to recruit, train, deploy, and motivate a massive distributed workforce. This advantage compounds slowly but proves durable.
Second, strategic evolution matters enormously. ISS's pivot from security to cleaning in 1934, its internationalization through the 1960s-1980s, its transformation to integrated facility services in the 2000s—each shift positioned the company for its next growth phase. The companies that survive 124 years are those that reinvent themselves while maintaining core identity.
Third, patient capital creates options. The private equity chapter tested ISS severely, but the ability to attract KIRKBI and Ontario Teachers' investment bought time for recovery. Not all PE stories end badly; some companies emerge stronger.
Fourth, crisis reveals character. The double punch of cyberattack and pandemic in 2020 could have destroyed ISS. Instead, the company used crisis to accelerate necessary changes, emerging leaner and more focused.
ISS has more than 325,000 employees around the globe, who we call "placemakers". That term—placemakers—captures ISS's aspiration: not just cleaning buildings or serving food, but creating environments where people can work productively and comfortably.
In a world increasingly shaped by remote work and artificial intelligence, the human touch that ISS provides—the cleaner who notices something amiss, the caterer who remembers a preference, the security officer who provides reassurance—may prove more valuable than ever. The "invisible" economy of facility services will remain essential as long as people gather in physical spaces.
For investors, ISS represents a bet on operational excellence in a challenging but growing industry. The company has survived world wars, financial crises, pandemics, and corporate scandals. It has navigated ownership by private equity and returned to public markets. It has grown from Denmark to the world.
The next 124 years will bring challenges none of us can anticipate. But if history is any guide, ISS will adapt—one building, one customer, one "placemaker" at a time.
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