By uniting under the GTY organization, the companies could leverage their marketing power, while also making it easier for government entities to access needed services.
In transactions totaling $497 million, GTY Technology Holdings is acquiring six government-serving technology companies at once, three of which hold spots on the GovTech 100 list.
The publicly-traded company was formed in late 2016 and has raised $552 million in financing for the purpose of building a digital gov tech platform through strategic acquisitions. The six acquisitions, which the company aims to complete in early 2019, would bring together a broad suite of Software-as-a-Service offerings tailored to city, county and state customers.
“These are solutions that complement our vision of a digital city hall,” said GTY Chairman and CEO Stephen Rohleder. “That’s basically a solution made up of multiple software solutions, something that not only improves the citizen experience but also automates and streamlines the back-office operations of the current civic environment.”
The six firms have a combined customer base of about 1,500 companies or organizations — mostly city and county users with some utilities and small state agencies, Rohleder said. Once under the GTY umbrella, the companies will keep their individual retail identities. “There will be an overarching brand that draws them all together, but each will keep its existing brand because we feel there is strong value there,” he said.
The plan calls for individual CEOs to retain their positions, becoming CEOs of their respective business units within GTY.
By uniting under the larger organization, the companies could potentially leverage their marketing power, while also making it easier for government entities to access needed services.
“There is not a lot of overlap in the customer base, so we see an opportunity to use master service agreements and other contracting vehicles to allow those clients to take advantage of the other solutions that are in our portfolio. Cross-selling and upselling is an important part of the proposition here,” Rohleder said.
Suppose, for instance, a client on the permitting-software side needs a new grants management tool. At the highest level, the CEOs already are looking for such windows, “and over the next six to 12 months we will provide training so that all of the sales force can recognize the same opportunities,” he said.
More than just an expanded sales opportunity for the respective companies, Rohleder described this as a potential win for government customers, who may have easier access to needed services via the combined entity. Master agreements through GTY could make it possible to engage diverse SaaS offerings without having to undertake a prolonged procurement process.
Among the companies to be acquired, some are describing GTY’s move as not just a recognition of their individual successes, but also of the strength in the gov tech sector as a whole.
“The small but passionate gov tech industry has been distinguishing itself since 2012 by creating tools that advance the goals of civil servants to modernize the public-sector experience,” CityBase founder and CEO Michael Duffy said in a press release. “This milestone is a validation of our peers’ and clients’ collective work to date and of the tremendous opportunity in front of us all.”
Most of the products in the combined suite of offerings are SaaS-based, with an implementation timeline of 90 to 120 days. They’re typically paid for out of operating funds, rather than as capital investments. GTY’s market play is premised on high state and local demand for such services.
“The total spending for the North American state and local government market is roughly 9.1 percent of GDP, second only to manufacturing. The annual tech spending is roughly $115 billion and software spending is between $30 and 40 billion a year,” Rohleder said. “It’s a very large market with a lot of runway for growth.”
After the acquisitions are completed the company says it will have approximately $237 million in cash on the balance sheet.