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Gov Tech Biz Quarterly Roundup: Q4 2022 With Jeff Cook

Despite a slowdown in the fourth quarter — as was expected — 2022 wound up being the second most active year for gov tech after a raucous 2021. Here are the deals that closed out the year and what they mean.

Closeup on businessman holding a card with Q4 QUARTER 4 message, business concept image with soft focus background and vintage tone
As predicted in last quarter’s M&A roundup, transaction activity slowed in Q4 2022, where our internal data suggests $1.5 billion in transaction volume, down from $2.1 billion in Q3 2022 and $2.4 billion from Q4 2021. Despite a slower Q4, 2022 was the second most active year on record: Total transaction volume was $7.4 billion — down from $13.2 billion in record-setting 2021, but still up materially from $4 billion in 2020.

But we view the slower Q4 transaction activity as a sign of the strength of the gov tech market. Gov tech businesses overwhelmingly “control their own destiny” because they are growing, cash-generating businesses, providing owners and investors the luxury of not having to transact or raise funds when there is uncertainty in the capital markets. And in the second half of 2022 there was a lot of uncertainty; the market elected to wait until stability returned to pursue transactions. However, those deals that did get done in Q4 were not “fire sales” and instead were very much the opposite — they were great deals that generally got done at valuation multiples consistent with 2021 and 2022 levels. In contrast to other sectors in technology, we have yet to see the deal or deals that suggest we are in a fundamentally different environment than 2021 or 2022.


Behind the scenes and despite the headlines on deal activity, there are many reasons for optimism. Many of the conversations with teams, owners and investors in gov tech businesses in the last few months have had a common theme — optimism about business performance in the year ahead and a desire to invest in growth, but reticence to do so given turbulence in the broader capital markets. That's translated to a growing backlog of companies hungry to "play offense” in the year ahead. And we are gradually seeing more data points that suggest the gov tech market continues to be on increasingly stable ground (consistent valuation multiples, deal volumes picking up, more buyers and capital seeking resilient categories like gov tech). Accordingly, while we expect Q1 2023 to be a slower quarter, what’s happening in the background suggests a pronounced uptick in activity as we get into Q2 and beyond.


Motorola Solutions Acquires Rave Mobile Safety

Why it Matters: In September 2022, Motorola CEO Greg Brown said on CNBC’s "Mad Money" that “this is the strongest demand environment we have ever seen” as a major upgrade cycle in public safety is underway. A quarter later, Motorola announced the acquisition of Rave Mobile Safety, a major deal for Motorola that provides a beachhead in the large and important mass notification category, while also adding incident management and critical communications capabilities. Mass notification has been an active market in the last few years and a center of gravity in its own right, with companies such as AlertMedia, Everbridge, OnSolve, Singlewire Software and others announcing new investments or acquisitions of their own.

We view this transaction as a bellwether for the year ahead — large public safety companies investing in transformational growth and expansion opportunities amidst a strong operating environment (which stands in contrast to many other areas of technology). Rave Mobile Safety was owned by technology investor TCV.


gWorks Acquires Softline Data and PubWorks

Why it Matters: Fresh off taking new investment from private equity firm BV Investment Partners, gWorks simultaneously announced the acquisitions of Softline Data, a provider of utility billing, meter reading and alerting software, as well as PubWorks, a public works software provider. The acquisitions grow gWorks’ product portfolio, adding important categories such as asset management as the company continues to carve out a niche as a modern, single-source platform serving the front- and back-office needs of the smaller end of the market.

Granicus Acquires Rock Solid

Why it Matters: Granicus’ acquisition of Rock Solid represents the coming together of two companies with a similar mission and product footprint focused on citizen engagement and serving the clerk, continuing a consolidation trend in this segment. Over the last several years, Rock Solid has built out its product footprint through strategic acquisitions — CitySourced (citizen services 311), PrimeGov (virtual public meeting and agenda management) and Swagit (meeting livestreaming) — following Granicus' and other citizen engagement platforms’ journeys from point solution to multi-capability platform. In addition, the acquisition expands Granicus’ footprint into Puerto Rico and Latin America, a region where Rock Solid has strong market share. The acquisition also brings Tom Spengler, CEO of Rock Solid and former founding CEO of Granicus, back to Granicus.

Hexagon Acquires Qognify

Why it Matters: Hexagon has acquired Qognify, a provider of video management and incident management software. Qognify will join Hexagon’s safety, infrastructure and geospatial division. Both Hexagon and Qognify serve multiple industry verticals, but the value of the combination is clear, particularly to public safety. Qognify brings situational awareness and real-time monitoring through its video management platform, coupled with its enterprise incident management system, enabling customers to efficiently manage and resolve incidents.

Polco Raises $14M

Why it Matters: Polco's community survey platform empowers citizens to inform government decision-making and enables agencies to collect insights on performance and constituent sentiment to better serve their communities. Polco’s raise is the latest in a series of investments in technology that enable data-driven government, following raises from companies such as Zencity. Polco’s $14 million funding round was led by Mercury Fund, with BAT Ventures and Royal Street Ventures participating.

RapidSOS Raises $75M

Why it Matters: Companies that provide additional information and automation to emergency responders have universally seen strong growth and recent investment, evidenced by RapidSOS' third investment since 2021. RapidSOS is an emergency response platform that, unlike other leading public safety platforms, is focused on bridging technology companies (think Uber, Google, SiriusXM) and first responders, enabling real-time data sharing, and ultimately more effective emergency response. This $75 million funding round brings RapidSOS’ total capital raised to date to more than $250 million. NightDragon led the round, with participation by BAM Elevate, Insight Partners, Honeywell and several others.

Tyler Technologies Acquires Rapid Financial Solutions

Why it Matters: Tyler Technologies has acquired Rapid Financial Solutions, a provider of payment processing, fintech solutions, card issuance and mobile engagement solutions. Rapid will join Tyler’s payments business unit, which was kickstarted in earnest with Tyler’s $2.3 billion acquisition of NIC in early 2021. Rapid adds more than 1,500 clients to Tyler’s existing base of 7,200 payments customers, and Rapid’s payments solutions tailored for courts and correctional facilities are a natural fit with Tyler’s courts and justice software.

GTY Technology Acquires DemandStar

Why it Matters: GTY Technology’s acquisition of DemandStar marks the company’s first acquisition since their take-private by GI Partners, which was completed in July 2022. DemandStar’s procurement marketplace, which connects 1,000+ government agencies with 150,000+ vendors, is a logical fit with GTY’s existing procurement solution, Bonfire. The combination of Bonfire’s procurement workflow platform and DemandStar’s marketplace give the company coverage across the full procurement life cycle.

Versaterm Acquires FivePoint Solutions

Why it Matters: Versaterm has consistently been one of the more acquisitive platforms in the public safety space in the last few years; its acquisition of FivePoint Solutions is the company’s seventh since the beginning of 2020. FivePoint provides data integration and case management solutions to state and local agencies, with a focus on law enforcement, courts and school safety. FivePoint brings data exchange and integration capabilities, a strategic addition to Versaterm’s growing public safety suite, particularly within the context of the broader market trend toward interoperable technology and unified, end-to-end platforms.

Miovision Acquires RapidFlow

Why it Matters: The transportation market has exploded with activity over the last couple of years, spurred by a strong funding environment (including the $1.2 trillion infrastructure bill) and a nationwide push to modernize our public infrastructure. Miovision’s acquisition of RapidFlow is one of the most recent transactions in the space. The two companies were commercial partners prior to the acquisition, and now as a combined company, RapidFlow’s Surtrac product (an adaptive traffic signal control system) in concert with Miovision’s traffic data, will enable their customers to achieve greater efficiencies and reduce travel times, congestion and emissions.

Beam Raises $6.4M

Why it Matters: Beam, previously known as Edquity, has raised a Series A funding round led by Potencia Ventures, with participation by several other investors. Beam’s platform streamlines administration of public benefits programs, emergency aid and cash assistance, making the process more efficient and ultimately getting financial support to citizens more quickly. Beam started its journey focused on education and has since expanded to other types of government benefit programs — this round will primarily be used to accelerate growth in distribution, in addition to continued product development.

Follett School Solutions Acquires Access-It Software

Why it Matters: Follett School Solutions, a mainstay in K-12 education technology, has acquired Access-It Software, provider of a library management system called Accessit Library, which adds to Follett’s existing library solution, Follett Destiny Library Manager. Access-It’s global distribution (4,000+ customers across 45 countries) unlocks access to international markets for the primarily North America-focused Follett.
Jeff Cook is a managing director at Shea & Co., an investment bank that has advised in more than 20 gov tech deals (investments and exits) in the past 5 years.