An American holding company has agreed to buy two Canadian cloud-based businesses for nearly US$200-million, with plans to combine them in a new publicly traded “digital city hall” business.
GTY Technology Holdings, a Nasdaq-listed holding company founded in 2016, said Wednesday it would pay US$108-million for Waterloo, Ont., procurement software company Bonfire Interactive Ltd. and US$90-million for the Burlington, Ont., budgeting and performance-management company Questica Inc.
GTY is a special-purpose acquisition company, or SPAC – a business that raises money through a public offering for private-equity-style deals. Including four additional U.S. companies, the total value of GTY’s acquisitions Wednesday to form a new cloud-based civic-services company is US$365-million in cash and stock, with the potential for future compensation depending on performance of up to US$132-million in cash and stock.
Bonfire, whose cloud software helps public-procurement teams find and select suppliers in competitive bidding, had put off previous private-equity suitors, said its chief executive and co-founder, Corry Flatt. However, he said in an interview that GTY had made an offer that would make Bonfire part of something where “the sum is more than the individual parts.”
GTY began conversations with Bonfire earlier this year. The Waterloo company, which has grown from two to 87 employees since 2012, will stay in its hometown and remain its own business unit within GTY.
Mr. Flatt said that the entire leadership team will remain part of Bonfire and that everyone invested in the company had signed up for the “continuing mission,” cashing out half of each of their shares, with the rest remaining invested in the new company. “It’s not an exit; it’s an on-ramp,” the CEO said.
The new company GTY is forming will take aim at what its executives believe is an extremely underserved market in cloud computing: local government. “All these processes that we take for granted could just be on the internet or on the mobile phone,” Harry You, a co-founder of GTY and chief financial officer of the new combined company, said in an interview. “What an obvious, wonderful investment opportunity.”
A spokesperson for Questica declined to comment, but its chief executive officer TJ Parass said in a press release that the acquisition was an “excellent opportunity for us to leverage our 20 years of budget-related expertise.”
The other companies in the new GTY entity include Chicago-based government-accessibility platform CityBase; Pasadena, Calif.-based eCivis, a grant-management system; San Francisco-based Open Counter Enterprises, which helps with permitting and licensing; and Sherpa Government Solutions, a budgeting software company based in Denver.
Recent nine-figure startup deals in Canada include Airbnb’s acquisition of Montreal-based Luxury Retreats International Inc. and PayPal’s purchase of Vancouver’s TIO Networks. Earlier this year, Toronto-Dominion Bank bought artificial-intelligence startup Layer 6 AI in a $100-million deal.