Corporate Development Spotlight

Spotlight Q&A:

Adam – Thanks for joining us for this issue of Corporate Development Spotlight, and congratulations on your recent move from Trimble to Granicus!  Can you provide a quick flyover of Granicus, your corporate development team and the approach to M&A?

Thanks for having me, Aaron. I joined Granicus at the beginning of this year and it’s been a really exciting time to jump on board. I am responsible for leading our strategic development process, M&A sourcing, execution and post-merger integration.

Granicus finds itself in the middle of several important macro trends as the provider of software that helps governments engage, serve and respond to their constituents. Public confidence in government has been tested over the last few years and it was further exacerbated by the COVID pandemic. Granicus’ mission is to deploy technology to help governments work better on behalf of the people they represent, which is just such an awesome calling in the current moment.

In terms of our strategy, Granicus is building a Civic Engagement Platform where we bring together a variety of solutions that government customers currently buy and use in silos. By making it easier for governments to adopt these solutions on a unified platform and allowing data to be utilized across different users within governments, we’re making technology work better for our government customers and, ultimately, the citizens that they serve.

In addition, Granicus benefits from an impressive set of investors—some of the most sophisticated software and PE players in the market—and it’s been a real pleasure to execute transactions and work on our strategy in concert with our experienced board members. Vista Equity has been involved in the business for several years and Harvest Partners out of New York also joined as a co-investor at the beginning of this year.

M&A has been and will continue to be a big part of the Granicus story. As I mentioned earlier, Granicus has assembled a unique platform approach to the Citizen Engagement segment by pulling together siloed capabilities into a unified offering. We are continuing to invest inorganically behind that thesis, particularly given how many innovative software companies are finding scale and success in our segment.

Additional congratulations on your team’s recent acquisitions of Bang the Table, OpenCities and GovQA (hot off the presses).  It’s no secret the M&A markets are on fire, so what best practices can you share on closing deals in a high valuation environment?

Thanks, Aaron. It’s been a busy year for us and indeed the GovTech space, in general. We ended up closing OpenCities and Bang the Table on almost the same day in June, purely coincidentally. Both companies were founded by awesome teams in Australia but have also built strong momentum in the US. These deals have kind of given us a dual benefit: we love the technology that we’re adding through the acquisitions, but we’ve also created some scale in the ANZ region where we see a lot of opportunity for the Citizen Engagement Platform to help regional government customers. I will say, however, that running integrations on Australian time zones is not for the faint of heart!

Our most recent deal, GovQA, actually just closed at the end of August. This is a business that we love and have known for a while. GovQA is the leading software provider to governments at the state and local levels for public records requests (eg. Freedom of Information Act). Their software enables citizens to make requests to government entities and helps those entities process the requests and stay in compliance with state and federal laws related to government transparency. It’s a phenomenal business out of Illinois that was backed a couple of years ago by Frontier Growth and we’re so pleased to have them on board. It’s a software category that has really been buoyed by the increasing demands for government transparency and accountability.

From a market perspective, we are definitely seeing an increasing level of interest in govtech, driven by both the pandemic (eg. digitalization across the government services landscape) and the fact that governments are increasingly becoming more savvy consumers of technology that helps improve the satisfaction of their residents. No doubt, the growth in the industry is bringing in a lot of investors and companies that are competing for deals in our space.

Granicus benefits from the fact that we work with a lot of partners already in our daily business. We know these companies, their tech and their customers really well. And we also have made it a priority to be a good buyer in the industry. Our executive team really loves doing deals and we’ve had a great track record of incorporating acquired teams into the Granicus family and our platform, so I think lots of sellers are attracted to the idea of joining forces with a company like Granicus.

Compare and contrast your deal making experience at multi-billion dollar, publicly-owned Trimble vs. PE-backed Granicus?

This is a great question and one of the reasons that I joined Granicus earlier this year. Trimble is an amazing company, and I had the pleasure of working on some fascinating transactions during my time there. The team at Trimble is really world class when it comes to M&A in their sector. But doing deals at a PE-backed platform software business is definitely a different animal than a large public conglomerate.

As I mentioned earlier, we benefit from a significant extended team of deal professionals that are part of our investor group. Those folks are some of the top software investors in the world and they constantly help us with deal sourcing and input around transaction negotiation and general inorganic strategy. I’ve really enjoyed the partnership that comes with working in a PE portfolio company.

One of the other benefits of being at an acquisitive PE-backed company is that we move really fast when we’re committed to a deal. We have a very discreet thesis on our space and the investment committee process for us and for our Board is very effective so we can go from sourcing to execution at velocity.

Predictions for the next 12 months in corporate M&A:

It’s hard to know how the broader economy will be impacted by successive waves of COVID variants like Delta and how that may filter down to the M&A environment, but in terms of B2B software and gov software I think it’s pretty clear that the next 12 months will continue to be really strong for revenue growth and transactional activity. The combination of available capital and the need for digitalizing work in many forms (especially remote work) will continue to drive the appetite for SaaS businesses, in particular.

On the supply side within GovTech, we’re also seeing a ton of businesses that are leveraging best practices from commercial or even consumer segments and applying it to help government customers (eg. social engagement, remote meetings, etc). These companies are starting to achieve greater scale, which makes them more actionable for a later stage PE portfolio company like Granicus. So I think there will justifiably continue to be a lot of interest in GovTech M&A because companies are actually creating and unlocking a lot of new value. The TAM for government software is enormous and underpenetrated.

From a tactical deal making perspective, we’re not finding the COVID restrictions to inhibit our sourcing or execution at all. Everyone has just adapted. Where it is starting to have some impact is on post-merger integration. It’s simply harder to bring teams together and manage complex project timelines when we can’t travel as easily to be together in person. That is particularly true for the cross-border deals we recently completed.

Most memorable M&A story:

As one of my former bosses and mentors always told me, “We are all a product of our previous deals.” All the deals I’ve worked on are special to me and I wear my scars proudly.

Perhaps one of the most memorable deals from several years ago involved a few brutal emergency flights to Sao Paulo and demonstrates how deal making is ultimately about relationship building. At the time we were looking to expand our transportation software business into Brazil and had negotiated an LOI with our leading candidate. We loved the team and their market position was a perfect fit for our strategy. Unfortunately, the transaction was dragging on for several months due to the Brazilian legal environment and some shareholder dynamics.

As we approached signing, the company I was working for entered into another unrelated agreement to acquire a large PE-backed software company in the US—the biggest deal we had ever done! The large deal involved debt financing and we decided that closing the Brazilian deal at the same time would create too much noise in the market.

Over the course of the next month, I flew down to Sao Paulo to meet the investors three different times to assure them that we intended to close but that we needed more time. Because I was also working on the larger transaction, I spent more time in the air than on the ground in Sao Paulo on those trips! It was not fun. Luckily, we had developed a very strong rapport with the co-founders early on and we were able to navigate the change in timeline and close both the larger deal and the Brazilian transaction eventually. Both have been hugely successful acquisitions.

About Lion Equity Partners:

Lion Equity is a Denver-based private equity firm founded with the core purpose of helping companies meet strategic divestiture objectives. The Partners of Lion Equity have significant experience acquiring corporate divestitures and the overall M&A process.

Why do corporations divest non-core divisions to Lion Equity:

• Proven track record of executing complex carve-outs from sellers, including Bed Bath & Beyond, Siemens, Pitney Bowes, Sodexo, The Washington Post and others;
• Demonstrated ability to execute time-sensitive carve-outs requiring speed and certainty of closure;
• Committed to flexible structures that meet seller’s divestiture objectives;
• Dedicated to seamless transition through a unique understanding of the specific issues involved both during due diligence and post-closing working with Seller, employees, customers and suppliers.

To discuss a corporate carve-out transaction, please contact: