Vancouver-based risk and compliance software provider Galvanize sold for US$1-billion

Vancouver-based risk and compliance software provider Galvanize sold for US$1-billion

Vancouver risk and compliance software provider Galvanize Inc. has been sold for US$1-billion to private equity-backed Diligent Corp., the latest in a string of cross-border deals involving Canadian tech companies.

Galvanize has been an under-the-radar success in Vancouver. It is a global leader in providing AI-powered anti-fraud and risk-management software and has 6,000 customers in 130 countries, including more than half of the companies in the Fortune 100 and S&P 500. It is also one of Canada’s most successful software companies led by a woman – Laurie Schultz – in an industry where senior leadership ranks are still dominated by men.

With the deal, New York-based Diligent, a corporate governance software provider backed by private equity firms Insight Partners, Blackstone and Clearlake Capital, will become the largest provider of online subscription software for tracking governance, risk and compliance needs by corporations.

By selling out, Galvanize is taking a different path than many other Canadian software companies that have been eyeing initial public offerings amid a hot market for tech stocks. In fact Galvanize, which changed its name two years ago from ACL Services Ltd., had long been considered one of Canada’s likeliest tech IPO candidates and had set itself on a course before the pandemic to potentially go public as early as next year, Ms. Schultz told the Globe and Mail in 2019. At the time, there were few Canadian tech companies eyeing a near-term move to the public markets.

Like many recent successes in the subscription “software-as-a-service” market, Galvanize’s roots date back decades. The company started in the early 1970s when University of British Columbia accounting professor Hartmut Will built the first interactive audit software. His son Harald Will launched ACL in 1987 to commercialize the software, then hired software industry veteran Laurie Schultz in 2011 as CEO. Under her leadership the company transformed its business from charging for one-time perpetual licenses for desktop-based software and annual maintenance fees to selling subscriptions over the internet. That transformation is typically financially burdensome for software companies, so in late 2017 the company tapped outside equity investment for the first time in its history. It raised $50-million from Silicon Valley private capital firm Norwest Venture Partners, which has invested tens of millions of dollars more since then. Galvanize set out to consolidate the fragmented market for integrated risk and performance software. Two years ago it purchased U.S. security risk-management software company Rsam.

Now it is itself being consolidated into a larger company. It’s the second acquisition this month by Diligent after it purchased Steele Compliance for a reported US$325-million. The two acquisitions give the privately-held Diligent a valuation in excess of US$7-billion, with revenue expected to reach US$550-million this year, according to reports.

Diligent did not publicly disclose the deal’s value, but a source familiar with the transaction said it was valued at US$1-billion. The Globe is not identifying the source because they are not authorized to discuss the matter publicly.

“This transaction fast forwards our vision as the operating system of conscious organizations and furthers our mission to make [governance, risk and compliance] today’s mission-critical enterprise platform,” Ms. Schultz said in a release. “Joining forces with Diligent, the clear market leader in the governance space, represents an immediate, material and meaningful redefinition of the $41-billion GRC market.”

News of the deal was first reported by Forbes.

Galvanize is the latest in a string of Canadian technology companies in recent months to sell to foreign buyers for hundreds of millions of dollars or more, including Benevity Inc., Verafin Inc., Element AI Inc. and CaseWare International Inc. Meanwhile, Canadian software companies including Lightspeed POS Inc., PointClickCare Technologies Inc., Nuvei Corp. and Dye & Durham Ltd., have bought foreign companies at an equally brisk rate. This week, Ottawa retail software giant Shopify Inc. raised US$1.55-billion in stock to fund growth initiatives, which it said could include acquisitions.

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Published at Thu, 25 Feb 2021 18:11:20 +0000