Interesting News about GovDelivery Major Stake Purchase by a Private Equity Firm

Article Posted by Next Gov:

Private equity firm buys majority of GovDelivery

By Gautham Nagesh 01/05/2010

The private equity firm Internet Capital Group Inc. announced on Tuesday it is acquiring a majority stake in the communications firm GovDelivery Inc., based in St. Paul, Minn.

Founded in 1999, GovDelivery is a leading provider of e-mail and text message alert services to federal agencies. The firm has 60 to 70 employees, though that number has been increasing in recent months. In September, the company acquired the social network GovLoop, which is known as “Facebook to the Feds.” According to a news release from ICG, the publicly traded company paid $19.7 million for an 89 percent ownership stake in GovDelivery. In 2009, GovDelivery’s revenue increased by 40 percent. The company expects to generate $13 million in revenue in 2010, compared with $9 million in 2009.

“The acquisition of GovDelivery in partnership with its management team is a great illustration of ICG’s primary acquisition focus going forward,” said Walter Buckley, chief executive officer of Internet Capital Group. “This strategy is expected to ultimately provide ICG access to cash flow and drive substantial long-term shareholder value. Additionally, we will also explore owning minority interests in rapid-growth companies in our focus sectors.”

GovDelivery chief executive officer and co-founder Scott Burns said ICG bought out most of the company’s almost 100 shareholders, leaving six members of senior management, including Burns and GovLoop founder Steve Ressler, as the only other shareholders. Burns said the deal was an opportunity for his firm to shed its dot-com era investors and expand its efforts to help federal agencies adopt social media.

“We were founded at the end of the dot-com era. As we’ve matured, the time horizon has lengthened and we really wanted a partner who could help reset the clock,” Burns said. “The nice part about ICG is that they’re much more focused on long-term value creation than quarterly earnings targets. That’s important to us given the ebbs and flows of our market, to be focused on the long-term, not just the next three months.”

Because ICG is a publicly traded company, Burns said his firm could step up the level of audits and internal controls, but he emphasized that similar processes are already in place because the company does all its business with the government.

“There should be no changes to operations or how we work with clients. It’s really just having a better partner [in ICG] who shares a vision with management,” he said.

Moving forward, Burns said e-mail continues to be the most popular channel for the public to receive communications from federal agencies. But GovDelivery also is working with agencies to increase the integration of their e-mail content with social media service and to roll out software applications that allow users to stream content from agencies.

“Government information tends to be very specific to individual needs,” Burns said, adding that for important messages e-mail is still preferred over newer communications tools such as Twitter.