In Q3, we saw a comparable number of announced transactions to prior quarters, although overall transaction dollars were down mainly due to the lack of large, billion-plus-dollar transactions that we saw in Q1 and Q2 (e.g., Tyler’s $2.3 billion acquisition of NIC in Q1). Our internal data suggests transaction volume of approximately $2.2 billion, versus $4.5 billion in the prior quarter.
Thematically, Q3 activity was primarily driven by strategic acquisitions, some from large public companies like Axon but especially from larger private equity-backed businesses such as Granicus, CivicPlus and Vector Solutions.
This stands in contrast to the first half of 2021, which saw transaction activity more evenly balanced between strategic acquisitions as well as gov tech businesses taking new institutional investment from private equity or venture capital firms. This trend is not surprising, given that historically strategic acquisitions have typically followed in the quarters after a business has taken private equity investment.
A few examples:
- Granicus: Investment from Harvest Partners and Vista (Q1 2021), followed by acquisitions of Bang the Table (Q2 2021), OpenCities (Q2 2021), and GovQA (Q3 2021)
- CivicPlus: Investment from Insight Partners (Q2 2021), followed by acquisition of Municode (Q3 2021)
- Vector Solutions: Investment from Genstar and Insight Partners (Q2 2021), followed by acquisition of Envisage (Q3 2021)
Looking ahead to the rest of the year (and into 2022), we continue to believe that we will see no slowdown in the level of activity, in particular from the freshly capitalized strategic buyers looking to accelerate their growth by acquiring new products, expanding into new market segments and entering new geographies.
Recapping Q3 2021
The Big Deal(s)
In the first half of 2021, nearly all of the “Big Deals” involved many of the larger gov tech businesses announcing new investment. This quarter, many of those same companies (Granicus, Vector Solutions and CivicPlus) are back in the headlines, though this time announcing meaningful acquisitions of their own.
Granicus Acquires GovQA
Why It Matters: Two short months following their announcement of the acquisitions of Bang the Table and OpenCities, Granicus announced their acquisition of GovQA in late August. GovQA is a leading provider of public records and compliance workflow solutions to local government, a segment of the market that has seen considerable growth due to the number of Freedom of Information Act (FOIA) requests. The acquisition brings an important new product into the Granicus portfolio at a time when public records requests are skyrocketing. The FOIA market has been an active one this year, with the GovQA announcement coming a quarter after another FOIA vendor, NextRequest, announced it was being acquired by ArchiveSocial.
Vector Solutions Acquires Envisage Technologies
Why It Matters: Vector Solutions’ acquisition of Envisage Technologies is a continuation of the considerable market activity in public safety in 2021, and an important transaction in the unification of solutions such as training, compliance and workforce management — the tools tasked with ensuring law enforcement, fire and EMS are prepared when they respond to an emergency. Combined, the two businesses are first to provide a comprehensive solution used by both individual agencies and the state-level authorities certifying them (such as state POSTs in law enforcement). The acquisition of Envisage Technologies comes three months following Vector Solution’s announcement of its recapitalization by Genstar, Insight Partners and Golden Gate Capital.
CivicPlus Acquires Municode
Why It Matters: CivicPlus’ acquisition of Municode marks their first acquisition since their $290 million investment from Insight Partners, which was announced in Q2 of this year. Municode has been in operation since 1951 and is the leading provider of codification services for local government agencies. Municode also offers a portfolio of citizen engagement solutions, including meeting and agenda management and website design, two product areas that overlap with CivicPlus’ Civic Experience Platform. The two companies come together with the shared mission to enhance the civic experience and streamline citizen engagement with government, and in the process have expanded their respective footprints to serve a combined 7,000-plus customers.
Notable Deals
Government Brands Gains Strategic Investment
Why It Matters: One of the most active acquirers in the gov tech market announced a transaction of its own in July, a recapitalization led by private equity firms PSG and TPG Capital. Government Brands, founded in 2017, has emerged as one of the larger players in the gov tech market, particularly in the areas of payments, court and land records, appraisal, tax, and public works. While perhaps not a household name like some of the other larger gov tech businesses, the company has quietly made 25 acquisitions of gov tech businesses since its inception, including household names such as nCourt.
Axon Acquires My90
Why It Matters: Facilitating more open and transparent communication between law enforcement and the communities they serve is a trend that is reshaping the public safety market, and Axon’s acquisition of the 5-year-old startup My90 is a testament to its importance. My90 provides solutions to collect anonymous feedback, surveys and data from both citizens and officers, providing insights for law enforcement agencies to better engage and serve their communities. My90 will reside within Axon’s Community Impact team, a team within Axon focused on reducing barriers between police and communities.
GovOS Acquires MUNIRevs
Why It Matters: GovOS (the software-focused subsidiary of Kofile) expanded into the business tax collection, licensing and short-term rental spaces via its acquisition of MUNIRevs. The MUNIRevs transaction was the first acquisition since GovOS was formed, and follows the acquisition of SeamlessDocs in Q4 2020. The acquisition accelerates GovOS’ growth in the citizen engagement space, where it has emerged as one of the larger and more acquisitive platforms alongside the likes of Granicus and CivicPlus.
Periscope Holdings Acquired by mdf commerce
Why It Matters: State and local governments are among the largest purchasers in the country, yet procurement in the public sector has not been streamlined in the way that it has in the private sector. The pandemic also unlocked a host of procurement challenges for government agencies, increasing the need for solutions that facilitate a more efficient purchasing process. Acquisition activity in the space has correspondingly spiked, and Periscope’s acquisition marks the third major government procurement deal this year, following Thompson Street Capital Partner’s acquisition of SmartProcure (January 2021) and OpenGov’s acquisition of ProcureNow (June 2021).
ArchiveSocial Merges With Monsido
Why It Matters: On the back of their acquisition of NextRequest in June 2021, ArchiveSocial announced in late August its merger with Monsido, a leader in web governance and accessibility solutions. Combined, the three businesses provide arguably the most comprehensive platform for public-sector organizations to address compliance requirements across their highest volume digital channels, and at a time when the volume of digital communications is growing rapidly.
Versaterm Acquires SPIDR and JusticeTrax
Why It Matters: Versaterm, backed by private equity firm Banneker Partners, has emerged as an active acquirer in the public safety/emergency response market, announcing five acquisitions in the last year. Building out broader incident and emergency response capabilities on top of a foundation of CAD/RMS has been a familiar approach in the public safety market. Versaterm has been expanding at a rapid rate, announcing two acquisitions this quarter and adding messaging and communications capabilities via the SPIDR acquisition, and forensics and investigations capabilities via JusticeTrax.
Civis Analytics Raises $31M in Series B Funding
Why It Matters: Civis Analytics’ $31 million funding round is a window into the future of what’s to come in gov tech. Civis provides a platform for governments to eliminate data silos and centralize their data — everything from citizen service requests to 911 data — and use insights collected from that data to gain a deeper understanding of their communities and shape policy around it. The use of “big data” has transformed many enterprises in the private sector and, as we have seen in the past with major technology trends like software as a service, it’s only a matter of time before the public sector adopts those same technologies.
Munetrix Gains Investment from Essex Bay Capital
Why It Matters: Creating, managing and reporting on a budget is a bedrock function of any public-sector organization, though today it is still largely done in Excel or manually. Given the category’s importance, it’s no surprise there has been a flurry of activity in the last few years as public-sector organizations adopt purpose-built solutions, with companies such as OpenGov, Forecast5, Questica and Sherpa all making announcements of new funding or acquisition in the last two years. Munetrix, focused on both the municipal and K-12 markets, is the latest company in this growing segment to announce a growth investment, from Boston-based Essex Bay Capital.
I’m always happy to meet others in the gov tech space and chat about what we’re seeing in the market. If you have questions or want to talk about the state of the market, active buyers and investors, how the exit process works or anything in between, please don’t hesitate to reach me at jcook@shea-co.com.
Editor's note: The firm PSG's name has been corrected from an earlier version of this article.
Jeff Cook’s firm, Shea & Co., served as an adviser for the Government Brands, GovQA and Envisage deals.
