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Joe Tucci’s GTY To Pay Up To $497M Buying 6 Firms In Gov-Tech Push

GTY, whose co-founders include former EMC Chairman and CEO Joe Tucci, wants to take advantage of what it calls a huge but fragmented market of local and state government agencies going through the digital transformation process.

GTY Technology Holdings is in the process of rolling six small solution providers with a focus on digital transformation for public sector clients into a single organization.

GTY will pay $365 million in cash and up to $132 million in cash and stock payouts for the six companies, which together will initially be known as NewCo, said Stephen Rohleder, who will serve as chairman and CEO of the new company.

Austin, Texas-based GTY is a publicly-listed special purpose acquisition company which in 2016 raised $552 million in its IPO, Rohleder told CRN. Joe Tucci, former EMC chairman and CEO, is a founder and co-chairman of GTY. The company is led by Tucci; William D. Green, a former CEO and chairman at Accenture; and Harry L. You, a former EMC executive.

[Related: Black Box CEO On What’s Next After Federal IT Services Unit Sale]

The company was founded with the express purpose of raising money, and is focused on acquiring companies to create a more efficient way to address fragmented markets, he said.

The six acquired companies were the first acquisitions for GTY.

GTY's founders have in the last two years looked at 80 companies as possible acquisitions, Rohleder said.

"Our intent was to find an area with a large addressable market, one that's tech-focused and at a point where customers are ready for digital transformation," he said.

The market GTY settled on was state and local government where spending accounts for about 9.1 percent of all U.S. GDP, which Rohleder said is second only to manufacturing, citing data from Forrester and Deloitte. State and local government spending on IT is about $110 billion per year, with $30 billion to $40 billion of that spent on software alone, he said.

"It's a huge market," he said. "But what really attracted us to this is, only 5 percent of state and local governments have begun to migrate to the cloud, according to Gartner. And I would venture to say that most of that is Office 365."

Meanwhile, Rohleder said, the market is going through several significant changes, including pressures to improve the user experience of constituents used to the ease of working with Amazon or Google, the demographic shift as millennials take over from baby boomers, and budget surpluses causing government organizations to look at investing in the cloud.

"Add these up, and you can see the perfect storm in that marketplace," he said.

GTY's NewCo is acquiring Bonfire Interactive, a Canadian-based developer of cloud-based e-sourcing and procurement software; CityBase, a Chicago-based developer of payment and digital services technology; eCivis, a Pasadena, Calif.-based cloud-based grant management system provider for government organizations; Open Counter Enterprises, a San Francisco-based developer of software for permitting and licensing procedures; Questica, a Canada-based provider of budgeting software and performance management technology; and Sherpa Government Solutions, a Denver-based provider of public sector budgeting software and consulting services.

The six companies will be re-organized into five business units within NewCo, including payments, budgeting, grant management, permitting, and procurement, Rohleder said. The six will keep their own names for now, although two companies in the budget business unit may eventually be combined, he said.

Combined, the six companies bring 1,500 current clients and a potential market of 45,000 potential clients, he said.

"We are fortunate to have our pack of companies," he said. "I feel we have six of the best CEOs in the industry, all with fast-growing companies. And we have the balance sheet to allow them to grow further and make further acquisitions if needed."

The next six months will see GTY and NewCo looking at several initiatives, including standing up a financial system, looking at how to improve pre-sales and post-sales activities, developing incentives for cross-selling products and services, recruit more senior sales leaders, and look at how to grow its post-sales capabilities, Rohleder said.

The company will also be considering how to rebrand its new business. "We think we'll have to rebrand," he said. "Whatever it becomes, it will be very relevant to our marketplace.”

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