The all-cash transaction, expected to close in the second quarter after shareholder approval, is valued at about $189 million, according to a news release Monday from MDF.
Once shareholders sign off, KKR — which is active in private equity, real estate and infrastructure, and is still known for its leveraged buyout of RJR Nabisco in 1989 — will take over a company with direct access to the estimated $1.5 trillion U.S. state and local procurement market.
New York-based KKR is making the acquisition through its mid-market Ascendant Fund, which is part of KKR Americas Private Equity platform, illustrating how attractive gov tech has become to private equity (PE).
“KKR is closely aligned with management’s vision to accelerate technology innovation across the broader MDF Commerce platforms,” John Park, KKR partner, said in a statement. “We look forward to the enormous opportunity ahead for the MDF Commerce e-procurement platform as governments increasingly embrace digital solutions.”
In a similar move nearly two years ago, PE firm GI Partners announced it would take gov tech provider GTY Technology Holdings private via acquisition, a deal that was seen at the time as potentially inspiring other PE operations to put more capital into gov tech. That pact valued GTY at $363 million.
MDF launched in 1996 and had raised more than $42 million, according to Crunchbase. MDF said in the release that more than 6,500 public entities use its procurement services, and more than 600,000 vendors are registered to the company’s supplier hub. The company employs about 650 people.
In August 2021, MDF announced its $207 million acquisition of e-procurement tech vendor Periscope Holdings, part of a series of procurement deals in government technology that included OpenGov and Thompson Street Capital Partners.
“We are excited to strategically partner with KKR to accelerate our expansion and scale our industry-leading platform even further,” Luc Filiatreault, MDF CEO, said in a statement. “We look forward to leveraging their relationships, resources and expertise as we execute on our strategy and explore new projects and opportunities.”
In its most recent financial results, MDF said that revenue from its own e-procurement services increased to $20.7 million during the last quarter of calendar year 2023 — which the company considers the third quarter of its 2024 fiscal year. That's a 4.5 percent increase in a year-over-year comparison. The state of Hawaii was among the new customers highlighted in those results.
The company also sells software-as-a-service offerings that include e-commerce and e-marketplaces for non-governmental businesses. Revenue for all MDF operations declined to $30.2 million in the third quarter of its 2023 fiscal year. That's a 4.6 percent decline in a year-over-year comparison. E-procurement accounted for 69 percent of that total.
