Our internal analysis suggests overall deal volume in Q2 of $2.2 billion ($7.8 billion if one includes the massive $5.6 billion PowerSchool take-private by Bain Capital, which we did not). This brings deal volume for the first half to $6.1 billion, nearly double the amount of the first half of 2023, putting the market on pace comfortably for the second-busiest year ever, and potentially giving the market a chance to eclipse 2021's records.
That activity aligns with a typical pattern we’ve seen emerge:
- Large businesses are recapitalized by private equity, with the new investments focused on undertaking faster market consolidation.
- Those same large businesses are more aggressive on tuck-in M&A following receipt of their new investment.
- Losing or “runner up” bidders in those sale processes look to find the next best alternative.
- Other companies in the category notice an uptick in buyer interest, ultimately pushing some sellers to test the market.
The confluence of those factors drives activity in subsegments with consistency.
The last year has seen the same patterns, but in different segments. This time around the major segments have been financial applications (including ERP and the surrounding applications such as budgeting, reporting, licensing and permitting, and property tax systems), parks and recreation, and public safety/emergency response technologies. Take financial applications — in the past 12 months we’ve seen larger deals involving BS&A, Civica, OpenGov and Edmunds, as well as a few others yet to be announced. In parks and recreation we've seen recent deals including Brandt, S3, Kalkomey and RecDesk. This activity will likely catalyze further activity in the space; in speaking with companies across these verticals, it’s clear there has been a noticeable uptick in buyer outreach. This is all a good thing moving forward, as those end markets are sufficiently large to contribute to a healthy amount of activity in the coming quarters.
The volume metrics above and transactions below are for deals announced between April 1, 2024, and June 30, 2024.
THE BIG DEALS
Why It Matters: The largest deal this quarter was a take-private, Bain Capital’s $5.6 billion acquisition of PowerSchool. The deal is the largest deal since the start of this column, and is notable both in size and the very small number of take-private transactions that have happened in the market (the PowerSchool acquisition follows take-privates of both GTY, now Euna Solutions, and mdf commerce in recent years, both by private equity investors). PowerSchool, a provider of web-based administrative and assessment software and data management, went public in July 2021, previously being backed by the large private equity firms ONEX and Vista Equity Partners. Today, PowerSchool supports more than 55 million students and 17,000 customers in 90-plus countries. Bain Capital has been an active gov tech investor, including its current partnership with CentralSquare Technologies, a public safety and public administration platform for state and local governments formed through the merger of Superion, TriTech and the public sector and health-care businesses of Aptean.
Brandt Information Services Receives Investment from Providence Equity
Why It Matters: One of the two major private equity deals in the parks and rec space this quarter was Providence Equity Partners' investment in Brandt Information Services. Brandt provides innovative, modern and secure technology solutions to public and private organizations with wildlife conservation and recreational management operations. The Florida-based company features a variety of platform offerings including licenses, registrations, reservations, marketing and merchandising. Current investor NexPhase Capital, a lower middle-market private equity firm, will retain equity in the company. Under NexPhase's ownership, Brandt completed two add-on acquisitions: Terra Technology Group in March 2022 and Itinio in December 2023. The latest transaction not only represents another private equity gov tech transaction but also highlights the increasing interest in outdoor recreation, a sector that has experienced sustained growth. Other parks and recreation deals during the quarter included Kalkomey and RecDesk.
OTHER NOTABLE DEALS
Kalkomey Acquired by Macquarie Capital
Why It Matters: This quarter the gov tech market saw a flurry of activity in the outdoor recreation sector. Another major deal next to Brandt was Macquarie Capital's acquisition of Kalkomey, a recreation vendor specializing in outdoor certification courses. Macquarie Capital, the primary investing arm of the Australia-based Macquarie Group, is an experienced government technology investor and is also currently partnered with PayIt, a government payments and digital transactions platform. PayIt also entered the outdoor recreation sector when it acquired Sovereign Sportsman Solutions (S3), which focuses on licensing and permitting for hunting, fishing, RVs, boats and event management, in 2023. Today, Kalkomey, which was previously owned by Cove Hill Partners, offers more than 360 regulatory-approved courses to more than 110 government agencies across the U.S. and Canada. The deal highlights the increasing focus on outdoor recreation tech as government agencies strive to improve citizen experience.
Edmunds GovTech Receives Significant Growth Investment from TA Associates
Why It Matters: Edmunds GovTech, a provider of ERP software solutions to local governments, announced a significant growth investment from TA Associates this quarter. Founded in 1972 and headquartered in New Jersey, Edmunds delivers an integrated suite of dynamic and intuitive solutions tailored to meet municipality needs, with a focus on financial accounting, budgeting, revenue collection, personnel management, permitting and code enforcement. The investment will provide expansion capital and valuable guidance to Edmunds, helping bolster innovation and expedite the completion of several key projects. LLR Partners, which originally partnered with Edmunds in 2018, will remain an investor in the business. The Edmunds transaction continues the wave of investment in government financial systems, including OpenGov, IGM Technology, BS&A and several others in the last year.
IGM Receives Investment from Lead Edge Capital
Why It Matters: Another notable gov tech private equity deal was New York-based Lead Edge Capital's strategic growth investment in IGM Technology. The deal marks IGM's first institutional capital raise and is aimed at accelerating the company’s growth through enhanced product development and operational investments. The Toronto provider of financial software to state and local governments is best known for its cloud-based platform Gravity, which helps users comply with complex regulatory reporting and features budget management, lease accounting and account reconciliation capabilities. Lead Edge believes IGM addresses a critical and underserved market where thousands of government agencies and organizations with complex reporting requirements are currently using in-house or manual processes.
Zencity Raises $40M
Why It Matters: Community and citizen engagement also continue to be attractive sectors poised for growth, particularly as governments have started to invest in solutions to build trust and transparency with their communities, as well as adopt technologies that enable them to understand what citizens are saying online as an input into their most strategic decisions. The latest example is Zencity's $40 million Series C funding round. Founded in Israel and headquartered in both Israel and the U.S., Zencity is focusing on expanding its local government customer base with a suite of survey, data analysis, messaging and community policing tools. This funding round was led by StepStone Group with participation from TLV Partners, an existing investor, and marks one of the larger later-stage growth investments in public administration. The capital will be used to hire engineers and data scientists, improve customer service and develop new AI-powered products, including its recently launched AI assistant. Today, Zencity serves customers in more than 40 states along with the United Kingdom, including major cities such as New York, London, Los Angeles and Dallas.
Clariti Raises $10M
Why It Matters: Community development, specifically permitting and licensing, has been one of the most active sectors in gov tech and it continues the hot streak with Clariti’s $10 million raise from CIBC Innovation Banking. The Vancouver-based company has experienced rapid growth and is on track for more than 40 percent year-over-year growth in annual recurring revenue. A year ago, Clariti acquired Camino, a Bay Area-based company that also focuses on permitting and licensing. The combination signaled further acceleration of citizen services transitioning online and highlighted how gov tech vendors are aggressively searching for ways to expand their existing product offerings and target customer bases. The most recent capital will be used to further integrate Camino into Clariti.
Greater Sum Ventures Acquires Kologik
Why It Matters: Following its recent investments in Utility, SOMA Global and STRAX Intelligence, Greater Sum Ventures continued its consolidation activity in the public safety sector during Q2. This quarter, Greater Sum announced the acquisition of Kologik, a Baton Rouge-based provider of a real-time, user-friendly dispatch, records and jail management platform. The acquisition complements Greater Sum’s growing platform of integrated solutions serving small- and medium-sized public safety agencies and adds credence to the firm’s role as an active consolidator in the space. The transaction will provide additional capital to increase Kologik’s investment in the innovation of cloud-based solutions that empower public safety agencies to have all the information they need at their fingertips.
BusPatrol Receives Investment from Weatherford Capital
Why It Matters: Weatherford Capital’s investment in BusPatrol follows a GI Partners investment made earlier this year, further enabling the company to scale rapidly and diversify products in the public safety and transportation space. Since its founding in 2017, BusPatrol has collaborated with school districts, law enforcement agencies and municipalities to combat illegal and dangerous passes of stopped school buses. The platform enables its partners with modern technology, offering a fully turnkey solution for capturing and processing violations, along with cloud-connected internal cameras and telematics data for school districts to ensure student safety. The transaction marks yet another in a long line of private equity investments in gov tech, and more specifically public safety.
Clubessential Acquires RecDesk
Why It Matters: Another significant deal in the outdoor recreation sector was the acquisition of RecDesk by Clubessential. Founded in 2005 and headquartered in Connecticut, RecDesk offers a cloud-based recreation management platform that simplifies operations for parks and recreation departments, aquatic centers, schools and community centers. The platform features membership management, program registration, facility scheduling and integrated payment processing, all designed to improve efficiency and user experience. Clubessential is a leader in membership management and embedded payment solutions backed by Battery Ventures and Silver Lake. RecDesk is set to join Vermont Systems and CampBrain as part of Clubessential’s parks and recreation vertical. The deal marks further activity in the outdoor recreation sector, a segment of the market that has attracted significant interest as people continue to flock to the outdoors, a trend that has persisted since the pandemic.
Black Mountain Software Acquires Fiscalsoft
Why It Matters: Black Mountain Software’s acquisition of Fiscalsoft represents its second foray into public administration this year, following its acquisition of Cascade, a project accounting and integrated cost platform, in February. Black Mountain is backed by Peterson Partners, and Fiscalsoft, a provider of accounting and billing software integrated with Microsoft Office, represents a continuation of the consolidation activity in the public accounting space. Black Mountain has provided ERP-based solutions to local governments for more than 30 years. The uptick of activity in recent months mirrors the broader market as growth from Q1 builds, laying the groundwork for future activity to come during the remainder of the year.
Axon Acquires Dedrone
Why It Matters: Axon, a global public safety technology leader and seasoned consolidator, continued the expansion of its portfolio add-ons. In Q2, Axon acquired Dedrone, which provides an AI/ML-enabled command and control platform that serves commercial, government and military users. Dedrone will strengthen Axon’s ability to help customers safeguard their communities, improve response to critical incidents and protect more places and lives. In the last few years, Axon has been one of the most active public safety consolidators in the market. Most recently, the global public safety technology leader acquired Fusus, a cloud-based video analysis platform with situational awareness and investigative capabilities, in May 2024 and Sky-Hero, a drone manufacturer, in June 2023.
OpenGov Acquires iGovServices
Why It Matters: Tax and revenue calculation and collection have been increasingly more important for local governments. OpenGov, the leader in modern cloud software for U.S. cities, counties, special districts and state agencies, has expanded its cloud platform to include a new tax and revenue suite through the acquisition of iGovServices, a leading tax calculation and revenue collection software company. Currently, OpenGov sells software for tasks that include budgeting, planning and procurement and has around 1,900 customers. iGovServices complements the OpenGov Cloud product by accelerating the team’s effort to make revenue collection more efficient and accurate. OpenGov has a history of successful technology acquisitions. This transaction represents the first acquisition for OpenGov since Cox Enterprises acquired a majority stake in OpenGov at an enterprise value of $1.8 billion in February 2024. Prior to this announcement, OpenGov acquired Cartegraph back in 2022.
Peregrine Raises $30M
Why It Matters: Public safety continues to be an active and growing market within gov tech as Peregrine, a technology firm that focuses on providing data integration to state and local government agencies, raised a $30 million Series B funding round. The funding round was led by Friends & Family Capital and Fifth Down Capital with participation by existing investors Goldcrest Capital, Craft Ventures, Godfrey Capital and other committed partners. Today, more than 40 state, regional and local agencies use Peregrine software, providing data analysis, integrated emergency management, alerts to first responders and real-time dashboards. The new financing will primarily be used to accelerate hiring plans, fuel growth and strengthen current product offerings. Founded in 2018, Peregrine’s customers currently serve and protect more than 25 million people across the country.
Versaterm Acquires Mindbase and ICS
Why It Matters: Versaterm, a global leader in public safety solutions, announced two transactions during the quarter, the first being ICS, a developer of mission-critical software tools designed for public safety agencies; and the second being the acquisition of Mindbase, a data-driven mental health and wellness platform provider. The transactions follow Versaterm’s acquisition of CI Technologies in March 2023 and Visual Labs in January 2023, both of which are focused on providing public safety solutions. Mindbase enhances Versaterm’s ability to deliver a more holistic approach to mental health and wellness, while ICS enables the company to cover all market segments for CAD/RMS. The transactions mark continued consolidation in the public safety market as Versaterm continues its M&A activity.
ESO Acquires Logis Solutions
Why It Matters: Another add-on deal by a PE-backed platform in the public safety space was ESO’s acquisition of Logis Solutions. ESO provides an end-to-end offering for EMS agencies, fire departments, hospitals and state and federal agencies that unifies data and workflows across the emergency response life cycle. Logis brings CAD and billing solutions, which enhance ESO’s offering at both the front end (CAD) and back end (billing) of the emergency response life cycle and enable the combined company to advance the goal of unifying data across the health-care continuum. The Logis acquisition is one of several (others include Occam, Interdev and Emergency Reporting) that ESO has completed since receiving a strategic investment from Vista Equity Partners in early 2021.
Procurement Sciences AI Raises $10M
Why It Matters: Government procurement has been a fairly active segment over the last couple of years, with companies like Euna Solutions, mdf commerce, Unison and others securing PE investment and/or pursuing add-on acquisitions. Procurement Sciences AI (PSci.AI) is another player in the broader procurement space, but focused on helping government contractors win new business. PSci.AI offers customers an AI-based bidding intelligence system that enables government contractors to optimize and automate procurement workflows from contract discovery, to bid/no-bid decision-making, to compliance review, to proposal generation and submission. The $10 million Series A funding round was led by Battery Ventures, with participation from Tower Research Capital, K Street Capital and Blu Ventures, and the capital from this round will primarily be used to expand the company’s research and development team as well as its sales and customer success functions.
