Berkshire Partners, a Boston private equity firm, has acquired government permitting and licensing vendor Accela in a move that could signal rapid expansion in the company’s near future.
The move is also financially massive relative to the usual market activity among tech companies that focus on serving government.
“This investment by Berkshire, I think, is the largest investment in government tech in history,” Accela CEO Ed Daihl said. “Their checks that they write are between a half-billion and a billion dollars.”
The company isn’t getting any more detailed than that, but by way of comparison to some recent non-private equity deals in the space, OpenGov’s Series C venture capital round in May raised $30 million, and ShotSpotter’s initial public offering in June raised $35.4 million.
And Accela has plans for the money. For one, it’s moving rapidly to expand to Europe, with plans well under way to open a development and customer support office in Dublin. It’s also working to move its on-premise customers to the cloud and a software-as-a-service (SaaS) model, with its annual major software update in October bringing, for the first time, functionality that will only work for Accela’s cloud users.
“Out of our new customers last year, we had nine new on-prem customers and 83 SaaS [customers], so we have turned the corner as being a SaaS company,” Daihl said.
The CEO is also actively looking for acquisition opportunities “to extend its lead” in permitting, licensing and land use software, particularly in Europe.
That’s pretty standard fare for private equity firms, whose investing model typically involves buying a company and increasing its value over the course of a few years through mergers, acquisitions and sometimes cost-cutting. But Daihl said Accela’s not looking to let anybody go.
“This isn’t a private equity company coming in and taking control and saying, ‘We want you to optimize and lay people off and stuff,’ this is an investment in growth, and we’ll be doing that … internally and [through] acquisitions,” he said.
In terms of its service offerings, the company doesn’t appear to have much news — it has its hands full with what it already does. After winning a major contract to help California license people in its newly-legalized recreational marijuana industry, Accela is one of the major players to fill that niche. The company also wants to move further into helping local government regulate gig economy companies like Airbnb and Uber. And it also continues to work on finding ways to offer better application programming interface (API) access to other companies.
“My long-term goal, just like Salesforce, is to open up to third-party software companies to develop on my platform,” Daihl said.
Though Berkshire is taking a majority stake in Accela, the company’s previous majority owner, ABRY Partners, will retain a stake and a place at the board. Berkshire bought out the stake of three other equity firms and a couple hundred individual investors.
Editor's note: At the time of publication, the deal had not yet officially closed, but was near completion.
Ben Miller is the business beat staff writer for Government Technology. His reporting experience includes breaking news, business, community features and technical subjects. He holds a Bachelor’s degree in journalism from the Reynolds School of Journalism at the University of Nevada, Reno, and lives in Sacramento, Calif.