Two of the largest cloud-based companies in the government technology market, GovDelivery and Granicus, have merged into a single firm.
The deal, brought about through the private equity firm Vista Equity Partners, is a major one for the market — the companies each serve more than 1,000 government entities at the federal, state and local levels in the U.S. Vista disclosed a $153 million price tag on its stake in GovDelivery. While it didn't list the size of its investment in Granicus, GovDelivery CEO Scott Burns told Government Technology that Granicus is about the same financial size as GovDelivery.
GovDelivery focuses on citizen-facing messaging services, while Granicus is known for live-streaming government meetings and managing documents such as agendas and legislation.
Burns also told Government Technology that he thinks those services fit very well together. In fact, he said, about 100 governments already use both companies.
“GovDelivery already drives a lot of traffic to online content that’s hosted in Granicus,” he said. “We already do that today, so citizens are already seeing [this].”
Burns, as well as Vista Operating Principal Bret Bolin, described the merger as a long-term growth move in a fast-moving space. Both companies are around 15 years old and are firmly planted in cloud solutions — exactly where Bolin thinks government is headed.
“In corporate as well as government, the ability to move fast and have agile platforms that create market value makes sense,” he said. “And even as you think about security in the construct of cyberthreats, platforms that are FedRAMP compliant, provide a … safer approach.”
Bolin said there’s no definitive timeline for how long Vista will hold onto the newly combined company, nor are there specific revenue goals. Rather, Vista simply looks to add value to its investments and expand the capabilities of its portfolio companies.
And indeed, Vista Equity’s website shows a broad range for the amount of time it tends to keep control of its investments. Among 21 previous portfolio companies that Vista has held since 2000, it has invested in some for as little as a year and as long as 12 years. But the average time between buying and selling its stake in the companies was four years and nine months.
A common theme in private equity investment — in which investing firms seek to quickly accelerate companies’ growth, often through merging them with other companies — is trying to achieve efficiencies where merging companies overlap.
But Burns doesn’t see the deal resulting in any staffing cuts. To the contrary, he sees an opportunity to hire more people, or possibly even to acquire more companies.
“The plan is to take advantage of the skills on both teams and to expand teams where it makes sense,” he said. “So our expectations are that the people who are here today are here tomorrow.”
One detail that isn’t worked out quite yet is what name the company will take on. Burns said both companies have well established brands, and he expects the branding efforts of each company to continue. But leadership is still mulling over what the name of the combined business will be.
In the meantime, the deal provides some easy opportunities for organic growth. Beyond the 100 or so shared customers, each company has more than 1,000 unique government clients. That represents a cross-selling opportunity.
But first, Burns wants to start working to really improve the way the two services work together. That will happen in places like Oakland, Calif., and Louisville, Ky., which are already customers of both GovDelivery and Granicus.
“We’d love for clients that are overlapping between the services to, for starters, just make sure that they’re really using the services well together,” he said. “What’s happening now is — for some of the people who are using the services together it’s incidental, and we’d love to make sure it’s more intentional.”
In Oakland, City Clerk LaTonda Simmons has spearheaded many technology implementations to engage citizens, and says the two companies merging is surrounded with excitement.
“The City of Oakland — with the citizen interest that we have in our legislative process, along with our own commitment to advancing transparency and citizen engagement — sees this as an amazing partnership,” Simmons said in a press release. “It [the merger] will continue to help us mobilize interest in a number of areas, most notably the decision-making process. You can appreciate not just being able to advance awareness, but more importantly effectively drive more citizens to participate in those decisions that affect the quality of their lives.”
For Burns, the move represents a long-awaited victory. He has been trying, on and off, to merge his company with Granicus for more than a decade.
“I’ve been a fan of Granicus since 2005," he said, "and I was meeting with the company multiple times a year until 2012 when they were bought the last time."
The acquisition of the two companies, as well as their merger, is part of a larger stirring in the government technology market. Just among the 100 companies in this space that Government Technology highlighted last year, the total capital raised in 2016 has amounted to about $186 million.
Burns is optimistic that the trend will only continue.
“I hope that this deal drives more capital and investment into this space and the public sector,” Burns said. “Because while it takes a long time, the [value] you’re able to achieve is amazing.”