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What’s Next for GTY and Gov Tech After Privatization Deal?

GTY plans to go private after being acquired by a private equity firm. Industry experts talk about what this means for government customers and whether this type of deal can happen again as the industry grows.

Two confident business man shaking hands during a meeting in the office, success, dealing, greeting and partner concept.
More products and services for users of government technology.

Longer-term thinking and breathing room.

New acquisitions.

Those are among the potential results of one of the most recent deals in government technology, one that will take GTY Technology Holdings private via an acquisition by investment firm GI Partners, at least according to industry experts in the days after the move was announced.

The Boston-based cloud software provider to public agencies launched in 2016 and now sells tools for procurement, budgeting, permitting and other government tasks.

California-based GI Partners, a private equity firm, launched in 2001 and says it has raised more than $32 billion in capital for investments in such areas as real estate, data and IT infrastructure, health care, services and software.

The deal might inspire similar actions by private equity in the gov tech space — emphasis on “might,” according to those experts.

“This deal signals that when gov tech businesses with large customer bases are undervalued by the market, there is a willingness from private equity firms to take the companies private,” wrote Steve Ressler, a gov tech adviser who now works as management partner for The Brydon Group, in an email interview with Government Technology. “While this may foreshadow increased interest in replicating, there is a limited number of publicly traded gov tech assets generally, so I wouldn't foreshadow a large trend.”


The deal comes amid a period of growth for GTY.

In its most recent public financial report, the company reported that revenue for 2021 increased 26 percent year over year to $60.5 million. Annual recurring revenue increased 23 percent to $51 million. The company’s customer count grew 7 percent to 1,894.

For 2022, the company projected revenue of between $71 million and $74 million, along with an operating loss of between $12 million and $15 million — compared to $45.5 million for the previous year.

The coming year promises more growth for GTY and other gov tech players as public agencies continue their digital push — an effort generally accelerated by the pandemic and which now stands ready to use federal assistance money as fresh fuel.

“While the common perception is that government lags behind private sector, which is true, they're catching up and started accelerated digital transformation,” said TJ Parass, CEO of GTY, during the company’s most recent conference call with investors. “First and foremost, as we exit the pandemic, all levels of government had the budget surpluses from improved tax revenues along with additional financial support from the CARES Act and Alpha Funding.”


As GI Partners takes over GTY — the deal still must win approval from shareholders after winning unanimous consent from the board of directors — the investment firm will take ownership of a company that was increasing its sales and marketing staff.

For example, GTY added a net of 23 sales and marketing staff during the last half of 2021, and brought on a new “chief growth officer.” It was planning more additions this year.

And like all gov tech providers, GTY is dealing with the labor shortage hitting various areas of the economy, including state and local governments.

As Parass put it, those staffing problems in the public sector will further boost moves to the cloud. As well, he said, business could be further helped by “younger, tech-friendly employees” demanding better technology.

“We saw a similar trend over a decade ago in the private sector when businesses realized that their information technology infrastructure was vital to not only increasing operational efficiency but increasing sales and enhancing customer service,” Parass told investors. “This emergence in the public sector will impact our go-to-market strategy and lead to larger average contract values.”

GTY did not respond to a request for comment and GI Partners was unable to provide immediate comment.

Over the longer term, the company could see benefits from the focus, breathing room and other factors that typically accompany private ownership, according to Jeff Cook, managing director at Shea & Co., an investment bank that has advised in more than 20 gov tech deals in the past five years.

“I think the initial thesis — bring together best-of-breed products in good market segments and grow as the gov tech market moves to cloud — is still a sound thesis,” he wrote in an email to Government Technology. “I would expect over time GTY has more of a balance between revenue growth and profitability, but I think any changes to that effect would be imperceptible to existing customers.”


GTY last made big news back in 2018, when it said it would spend $497 million to buy six gov tech companies at once.

Those six companies had a combined customer base of about 1,500 companies or organizations — mostly city and county users with some utilities and small state agencies.

Indeed, it was that “six-way merger” and its use of a special-purpose acquisition company that made the company “fairly unique,” David Shohet, managing director for MergerTech Advisors, told Government Technology in an email.

Now the company has embraced a deal that represents a change in direction, he said — a direction that can be projected based on previous behavior from private equity firms.

“The assumption is that GI Partners will pursue some of the same playbook we’ve seen with other PEs and pursue a more aggressive growth strategy through further acquisitions,” he said.

Support for that point came from Cook.

“You will likely see GTY start making acquisitions again at some point (as pretty much every PE-backed gov tech business does), which will bring new products under its umbrella,” he wrote.

The deal also will bring fruits to the professionals and officials who buy and deploy gov tech, according to Frank Proner, vice president at MergerTech, who said to expect an expansion of GTY products and services — an expansion that comes as the gov tech field becomes more crowded and continues to attract more investor interest after a record-breaking 2021.


GTY could have followed a different path — for instance, as Ressler pointed out, joining forces with other, larger gov tech providers instead of remaining a stand-alone platform. That decision, and reduced pressure on quarterly earnings, will allow the company to focus on longer-term plans and investments in product and services, he said.

Even so, it is not certain that other such deals will soon happen in the broader gov tech world. That’s a reflection of the realities of that market even as more public agencies buy the latest digital tools for public safety, infrastructure, citizen engagement and other tasks.

“It’s possible given that public market valuations for gov tech and technology stocks in general are down meaningfully from recent highs,” Cook said about this type of deal. “That said, the biggest limiting factor is that there are simply not that many public gov tech stocks, and many of them (e.g., Tyler, Motorola and Axon) have very large market capitalizations.”
Thad Rueter writes about the business of government technology. He covered local and state governments for newspapers in the Chicago area and Florida, as well as e-commerce, digital payments and related topics for various publications. He lives in Wisconsin.