VC-backed Bonfire and Burlington’s Questica to form part of GTY’s SaaS/Cloud Software company

GTY Technology Holdings Inc. (NASDAQ: GTYH), a publicly traded special purpose acquisition company (SPAC), has entered into definitive agreements to acquire six companies that are leading the digital transformation in the public sector market. The transaction is expected to close in early 2019.

GTY which raised US $552 million in its IPO in November 2016 is required to complete qualifying acquisition or acquisitions with 18-24 months of completing its IPO. (all figures in US dollars)

Among the six companies to be acquired are Bonfire Interactive Ltd. of Kitchener, Ontario and Questica Inc. of Burlington, Ontario.

GTY will pay the holders of Bonfire capital stock up to $49 million in cash and up to $49 million in new GTY stock and up to $10 million in earnout payment to be paid 50/50 in cash and stock.

GTY will pay the holders of Questica capital stock up to $60 million in cash and issue 3,000,000 shares exchangeable into shares of New GTY company common stock.

Bonfire is backed by Battery Ventures, Crosslink Capital, Spider Capital, FundersClub, Garage Capital Fund II, Y-Combinator, having raised CDN $11 million in seed and Series A funding from the its backers.

LaBarge Weinstein LLP and Torkin Manes LLP act as legal counsel to Bonfire and Questica respectively. Stikeman Elliott LLP acts as Canadian counsel for GTY.

photo credit: Bonfire and Questica

News Release

GTY TECHNOLOGY HOLDINGS ANNOUNCES BUSINESS COMBINATION

GTY to Create Leading North American SaaS/Cloud Software Company

Focused on the Public Sector with Diverse and Prominent Client Base
Significant growth opportunities in the underpenetrated public sector market as it embarks on digital transformation
Strong growth, recurring revenue and margin expansion profile
Experienced management team with decades of government, technology and financial experience to drive growth, margin expansion and strong cash flow generation

AUSTIN, TX – September 12, 2018 – GTY Technology Holdings Inc. (NASDAQ: GTYH) (“GTY”), a publicly traded special purpose acquisition company, announced today that it has entered into definitive agreements to acquire six companies that are leading the digital transformation in the public sector market. The transaction is expected to close in early 2019.

GTY, which is led by William D. Green, Joseph M. Tucci and Harry L. You, raised $552 million in its IPO in November 2016. After an extensive search process, the sponsors elected to bring together best-in-class companies to establish an integrated software solution in the highly fragmented and underpenetrated public sector market. With a diverse combined client base of over 1,500 clients, the combined company will be a scaled software platform for state and local governments, helping them to address increasing demands by constituents for improved citizen experiences and more efficient operations.

Bill Green, co-Chairman of GTY, stated, “Joe, Harry, and I believe that the state and local government market is at an inflection point, presenting a profound market opportunity to bring together these leading franchises. With GTY as a partner, their dynamic founders and teams will create the next integrated, digital solution for governments, with offerings for citizen interface, payments, grant management, budgeting, permitting, and procurement needs. We will give these companies channel support and provide the capital, expertise, and runway they need to capture significant share of this market which is poised for transformation.”

Joe Tucci, co-Chairman of GTY, added, “Similar to our experience with other emerging, underpenetrated software categories, we see a bright future in helping governments and other public entities move to the cloud to become more efficient. The companies we selected have the agility, speed, and flexibility to lead digital transformation in the public sector. The integrated digital town hall platform, the move to the cloud, payments engine, nascent penetration of a large addressable market, and best-in-class companies are the hallmarks of an incredibly promising technology investment.”

GTY will form a new entity which will acquire the following companies:

  • Bonfire Interactive Ltd. (“Bonfire”), based in Canada, a developer of cloud-based eSourcing and procurement software that helps purchasers find, engage, and evaluate suppliers and manage the resulting contracting and performance relationships;
  • CityBase, Inc. (“CityBase”), based in Chicago, IL, a developer of technology, payment and communication channels and aggregator of operational data that also creates websites and mobile applications for utilities, self-service kiosks and point of sale tablets with customized solutions;
  • eCivis Inc. (“eCivis”), based in Pasadena, CA, a cloud-based grants management system provider for state, local and tribal governments that also offers writing, consulting and professional services as well as financial and program performance tracking, cost allocation and budgeting;
  • Open Counter Enterprises Inc. (“OpenCounter”), based in San Francisco, CA, a builder of user-friendly software to guide applicants through complex permitting and licensing procedures;
  • Questica Inc. and Questica USCDN Inc. (together, “Questica”), based in Canada, a provider of budgeting software, performance management and transparency and data visualization solutions; and
  • Sherpa Government Solutions LLC (“Sherpa”), based in Denver, CO, a provider of public sector budgeting software and consulting services.

Harry You, President and CFO of GTY, who will be the CFO of the new entity, added, “Each company is a technology leader in its domain with a diverse client base, providing cross-sell possibilities. The combined company’s high growth, recurring revenue base, customer satisfaction, capital efficiency, and path to near-term profitability are key elements that led to our pursuit of this opportunity. Given the fragmentation in the state and local government market, we see expansive scale achievable through accelerated, organic growth and investment of capital in our respective companies as well as through immediately available, accretive acquisitions. We believe the combined company will be a well-capitalized public entity that will give customers confidence relative to its staying power in the market versus smaller, private vendors.”

Under the definitive agreements, subject to customary adjustments as provided therein, GTY has agreed to acquire the companies for total aggregate base consideration of $365 million in cash and stock, plus an aggregate earn-out consideration of up to $132 million in cash and stock. In addition, the new entity is expected to have an equity incentive plan in place at closing with 5.3 million shares reserved for future awards to employees and other plan participants. Mr. You added, “Our founders and their colleagues are looking forward to participating in the exciting growth prospects of the new company and are incented through earn-outs, rolled over equity consideration, and new stock grants to help catalyze shareholder returns.”

In connection with the business combination, GTY expects to hold a special meeting of its warrantholders (to be held immediately prior to the special meeting of GTY’s shareholders for the business combination) to approve an amendment to the warrant agreement governing its outstanding warrants to provide that, at the closing of the business combination, each whole public warrant will be automatically exchanged for $1.35 in cash and each private placement warrant will be automatically exchanged for $0.75 in cash. Approval of the warrant agreement amendment will require the affirmative vote of at least 50% of the outstanding public warrants.

Assuming no GTY stockholders exercise their redemption rights in connection with the business combination and GTY obtains warrantholder approval to amend its warrant agreement, the combined company is expected to have approximately $237 million of cash on the balance sheet at the closing to fund earnings producing capital expenditures, salesforce expansion, future acquisitions to accelerate growth, and general corporate purposes.

Stephen Rohleder, a GTY Director and the former Accenture COO and Group CEO for Health and Public Service Operating Group, will become Chairman and CEO of the new entity. “I am very excited to lead this incredibly innovative group of companies today, at what I see as an inflection point in the public sector,” said Mr. Rohleder. “I look forward to utilizing my 35 years of experience, customer and channel relationships in the public sector and, more specifically, with state and local governments, to scale the best-in-class vertically-integrated solution we are creating. With Harry You serving as CFO and Dan Lauderback, my former CTO of the Accenture Health and Public Services Group, agreeing to join as COO, we have the firepower to build a world-class platform today and for years to come.”

In order to provide sufficient time to complete the business combination in early 2019, GTY expects to seek shareholder approval of an extension of GTY’s deadline to complete an initial business combination from November 1, 2018 to a date in the first quarter of 2019. All current directors of GTY are expected to be appointed to the board of the new entity at the closing. The board of directors of GTY has approved the proposed business combination, and the applicable governing body of each of the target companies has approved its applicable proposed transaction. In addition, GTY expects to receive within one business day the requisite shareholder consents for CityBase, eCivis and OpenCounter and has received voting and supporting agreements for Bonfire. Completion of the proposed business combination is subject to GTY shareholder approval and other customary closing conditions.

Citigroup Global Markets Inc. served as the sole book-running manager for GTY’s initial public offering and was a financial advisor to GTY on the business combination. Winston & Strawn LLP is acting as legal counsel to GTY.

GTY has posted an investor presentation and pre-recorded video on its website: www.gtytechnology.com. The investor presentation and pre-recorded video will be available on GTY’s website until December 31, 2018.

About Bonfire

Bonfire, a leader in strategic sourcing and procurement technology, empowers organizations to make the right purchasing decisions. With tools to support the entire vendor lifecycle (sourcing, contract management, and vendor performance), Bonfire goes beyond traditional mechanics to make complex decision making easy. Bonfire works the way you do on a single cloud platform designed to unite stakeholders, absorb compliance requirements, and facilitate advanced evaluation techniques. The combination of flexible technology with world-class customer service makes Bonfire the solution of choice for both public and private sector organizations of all sizes around the globe. Bonfire was named as a 2018 Gartner Cool Vendor and proudly reports a client retention rate greater than 96 percent.
GoBonfire.com

About CityBase

CityBase gives people and businesses an intuitive way to interact with utilities and government agencies. CityBase’s technology dramatically improves constituent services through payment solutions, digital services and API development for cities, states and utilities. For more information please visit http://www.thecitybase.com/.

About eCivis

Since 2000, eCivis (http://www.ecivis.com ) has been most trusted and widely used SaaS grant management system by state, local and tribal governments. eCivis helps thousands of government agencies maximize their grant revenues, track their financial and program performance, prepare cost allocation plans and budgets, and access free open data tools to make sense of Federal data.

About OpenCounter

OpenCounter builds user-friendly software to guide applicants through complex permitting and licensing procedures, guiding applicants through the process by estimating the total fees and requirements for the project, and allowing applicants to apply and pay for permits online.

About Questica

Questica’s budget preparation and management software suite – Questica Budget – Integrates with more than 25 financial systems and other systems. This ensures organizations can access all the information they need to develop, track, monitor and adjust their budgets, plus report out to stakeholders when and to who they need to. Questica Budget Suite’s Operating, Salary, Capital and Performance modules ensure public sector organizations have a clear view into their budgets, forecasts and expenditures, thus enabling those organizations to deliver on their financial and non-financial strategic objectives. Additionally, Questica’s easy-to-use OpenBook transparency and data visualization software can be used to share an organization’s financial and non-financial information with both its internal and external stakeholders.

About Sherpa

Sherpa is a provider of public sector budgeting software and consulting services. Clients have benefitted from a unique deployment model, staffing projects with consultants averaging 20 years of experience and having one project team from sales through implementation to post-implementation support.

About GTY Technology Holdings Inc.

GTY Technology Holdings Inc. is a blank check company formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.

Ted Liu

Ted Liu, M.Sc. (Mining), MBA (Finance), is the Editor of Private Capital Journal and CanadaMetals.ca, and former Editor of Canadian Private Equity. Ted has been passionately tracking Canadian private capital industry since 1992, most recently served as Research Director for The Canadian Venture Capital and Private Equity Association (CVCA). Ted was the architect of CVCA infobase, and is the architect of CPE Media's Financings.ca, the most sophisticated and advanced all private capital and public market financing database.