When Vancouver tech mainstay ACL Services Ltd. rebranded as Galvanize in 2019, an initial public offering was still on the horizon as the company’s next monumental splash.
“We’re really excited about that journey,” CEO Laurie Schultz told BIV at the time, adding she imagined the company best known for auditing software, and governance, risk management compliance (GRC) software would go public in four to five years.
Like virtually all businesses, the pandemic had a way of upending plans in a distinct way.
In February 2021, New York-based corporate governance software provider Diligent Corp. revealed it was acquiring the B.C. firm in a deal Schultz later told BIV was worth US$1 billion.
Galvanize had climbed to the rung of “unicorn” – tech companies valued at US$1 billion or more – in a city that has delivered few over the past 20 years. The last Vancouver company to do so was Avigilon Corp. in 2018.
“One thing that really surprises me is the amount of inbound interest we got in a COVID year,” Schultz said. “Honestly, I was spending about 50% of my time in the second half of 2020 trying to respond to inbound interest.”
David Raffa, president of Valeo Corporate Finance Ltd., said private equity firms are swimming in cash right now amid the pandemic, while credit markets are wide open and interest rates are at record lows.
Valeo specializes in mergers and acquisitions, and Raffa facilitated the sale of another company to Diligent about five years ago.
He described the Galvanize acquisition as “bullish” but said that if one were to scratch below the surface of the deal, it should be obvious why the Vancouver company was able to squeeze the hefty price from Diligent.
A 2021 report from Valeo points to “scope expansion” – adding new products, entering new business segments, acquiring talent and adding intellectual property – as the No. 1 driver behind acquisitions over the past five years.
“You can capture both more market share and more wallet from existing customers,” Raffa said. “So Galvanize is risk management audit software and Diligence is governance software. You put the two together, and it’s pretty obvious that a lot of customers are going to need that wider solution.”
Diligent also announced this month it was acquiring Steele Compliance Solutions Inc., which specializes in ethics and compliance software.
Diligent CEO Brian Stafford told BIV he’s been watching and admiring Galvanize from afar for a number of years.
“We thought it was a super compelling opportunity to combine forces and be able to scale each of our respective missions and have more impact across our point,” he said.
The latest string of acquisitions comes three years after Diligent acquired Kamloops-based iCompass Technologies Inc., founded by former B.C. transportation minister Todd Stone.
“Just like the way Salesforce is trying to expand beyond being a CRM [customer relationship management] company, these guys are trying to expand beyond being just a governance company,” Raffa said.
Leading up the acquisition, Galvanize appeared earnest in its efforts to go public.
Just prior to the 2019 rebrand it acquired New Jersey-based Rsam, adding 150 workers to its roster as well as a number of international offices.
Capital for the Rsam deal came from a $50 million investment by Norwest Venture Partners in 2017.
“You hear all the time that the best way to maximize your exit is having multiple buyers, but actually the best way to get an attractive exit is being in a position to say no to multiple buyers,” Raffa said. “They’ve been very clear that they were on a path to IPO. ‘About-to-IPO’ usually says, ‘We are not up for sale.’
“The public representation may have been that they wanted to go public, and I’m sure that they were serious about it. There’s no doubt that within the boardroom part of the strategy will be: This should smoke out potential buyers and get them to pay a premium to acquire us. So it looks to me like since getting involved, [Schultz] has done a masterful job.” •