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Diligent Corp. acquiring Vancouver software firm Galvanize in US$1b deal

Transaction among the latest in string of acquisitions of West Coast tech companies
Galvanize GEO Laurie Schults | submitted

Software firm Galvanize (ACL Services Ltd.) is joining in on the M&A action unfolding among Vancouver tech companies this year.

New York-based Diligent Corporation revealed Wednesday (February 24) it’s set to acquire the B.C. company best known for auditing software as well as its governance, risk management compliance (GRC) software.

Terms of the deal were not disclosed but Galvanize CEO Laurie Schultz confirmed to BIV the transaction was worth US$1 billion.

Galvanize’s technology has been used to bust drug cartels committing fraud using food stamps, catch doctors falsely diagnosing cancer patients, help tax authorities around the world ensure proper collections and mitigate against money laundering at casinos.

“We started [as a] small and humble Canadian story. We made some bold moves and this kind of outcome just really legitimizes the effort, and I’m so proud and grateful,” Shultz said.

“Things will change in ways that are really, really positive, and we’ll have to make some compromises as we move in, as is the case with any kind of partnership.”

The Vancouver company has a headcount of just under 500 workers — all of whom will remain on board, including the leadership team.

Schultz said it’s unclear what her next job title within the new organization will be but the Galvanize name will be sticking around, at least for the short term.

Although it specialized in auditing when it was founded in 1987 as ACL, the company rebranded as Galvanizetwo years ago.

“The reality is after 30-plus years in the market, we offer a capability that is way, way, way beyond audit,” Schultz said in 2019.

“While our ACL brand has been such a great brand when selling into the audit segment, it actually can work against us when we’re trying to sell outside of audit.”

The same year of its rebranding, Galvanize also acquired New Jersey-based Rsam, a software company known for its GRC tools.

That deal added 150 workers to Galvainze’s roster as well as a number of international offices.

Capital for that Rsam acquisition came from a $50-million investment by Norwest Venture Partners in 2017, and Shultz said at the time that the acquisition was aimed at giving more tools to companies looking to address cyber risk.

Prior to the acquisition by Diligent Corporation, Schultz told BIV in 2019 the long-term plan was for Galvanize to go public within four to five years.

Jump ahead to the pandemic era and Schultz said the company was responding to considerable inbound interest from potential buyers.

“It’s not just about the financial outcomes — we’re really, really proud of a $1-billion U.S. valuation — it was actually about the opportunity to fast forward,” she said.

“Our combined businesses and solutions was just not something we could ignore, and here we are today.”

The past year of COVID-19 has resulted in a massive accumulation of private equity (PE) funding worth trillions as well as significant sums of cash on the balance sheet for corporate America, according to David Raffa, president of Valeo Corporate Finance Ltd.

B.C.-based technology companies look especially primed for consolidations and acquisitions in the coming months, he said.

Raffa noted Vancouver’s proximity to tech hubs like Silicon Valley and Seattle, its access to top-tier universities and the large talent pool paid in Canadian dollars at lower comparable salaries than their American counterparts has been drawing attention from U.S. firms.

“It’s a good time to buy when valuations have been reduced and your cash [is] flush. So those things – plus the opening up of the credit markets and continued low interest rates – those are the macro levels that are going to drive M&A,” he said.

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.

Although Galvanize is headquartered in Vancouver and Diligent is headquartered in New York, Stafford said working from home will remain the norm for both companies for now.

“We're really excited about the combination, and the leadership team is an important part of that,” he said, adding he’d “love to find a way to continue to partner” with Galvanize’s C-suite as long as possible.

Diligent also announced this month it was acquiring Steele Compliance Solutions Inc., which specializes in ethics and compliance software.

Both the Glavanize and Steele deals are expected to close in March.

Evercore Inc. (NYSE:EVR) served as Galvanize’s financial adviser while Fasken Martineau DuMoulin LLP served as legal adviser.

The Galvanize deal is just the latest in a series of high-profile acquisitions to kick off the year for B.C.’s tech community, including that of Vancouver’s East Side Games Inc., Next Level Games Inc. and Burnaby’s Vanrx Pharmasystems Inc.

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