Unicorn in the patch: Calgary software firm Benevity achieves rare $1.1-billion valuation in deal with U.K. private equity firm

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A British private equity firm has purchased control of Benevity Inc., the darling of Calgary’s flourishing technology sector, in a deal valuing the company at US$1.1-billion.

Hg Capital LLP has bought the stake from existing shareholders, including founder and CEO Bryan de Lottinville and U.S. private capital giants JMI Equity and General Atlantic. Mr. de Lottinville and president Kelly Schmitt appeared before staff Wednesday dressed as unicorns to announce the deal. Companies that achieve US$1-billion valuations are called “unicorns.”

Benevity produces software that is used by 19 million employees at 650 enterprises including Nike, Coca-Cola, Apple and Google to donate money and volunteer hours to charities.

The deal is the second in recent weeks in cities outside Canada’s main tech centres with a valuation above US$1-billion. It follows Nasdaq Inc.’s US$2.75-billion purchase of St. John’s-based Verafin, which provides fraud detection and anti-money-laundering software. Benevity’s transaction sparked excitement among Calgary’s business and political leaders, who are looking to the industry to help counteract the effects of a lengthy downturn in oil and gas.

Reached Wednesday evening, Mr. de Lottinville told The Globe and Mail, “it’s a very positive result for Benevity, our people and our clients. [This is] validation of the idea of doing well by doing good, and the elevation of corporate purpose as a thing.”

He confirmed the price on Thursday. “The financial advisors told us that based on a valuation north of US$1-billion, this is the largest deal ever in the [environmental, social and governance] space and one of the biggest software deals in Canada in the last decade,” he wrote in a blog post.

The company, with about $100-million in annual revenue, last raised money in October, 2019, when JMI and General Atlantic invested $40-million in a deal valuing the company at close to US$400-million. General Atlantic, JMI and Benevity management will retain a stake with the deal.

The company provides a “white label” platform that companies use internally to handle their employees’ charitable donations and a range of initiatives aimed at improving employee engagement and meeting their corporate social responsibility initiatives.

Benvity attracted significant global investor interest, and received “multiple offers,” Mr. de Lottinville wrote.

“Benevity is already a robust, high-growth business with a trusted platform for some of the world’s largest global brands looking to boost their purpose-driven activities. We look forward to working with the team to become even more pervasive and impactful,” Hg senior partner Nic Humphries said in a statement.

Benevity, with 650 employees, is a leading light in a Calgary tech industry that is gaining traction as city officials seek to diversify the economy. It is also the latest Calgary company to achieve a billion-dollar evaluation. In 2019, U.S. financial services giant Morgan Stanley bought software firm Solium Capital for $1.1-billion. Early this year, RS Energy Group, a data and analytics provider focused on the oil and gas industry, was sold to Genstar Capital for a reported US$1-billion.

“It is a pretty big deal, and it sends a message that we’re desperately trying to send to the rest of Canada, but also the world, about this emerging tech ecosystem here that’s happening - built on a really strong talent base and a community that still has that entrepreneurial spirit,” said Mary Moran, chief executive of Calgary Economic Development.

The city has zeroed in on the tech and biosciences sectors among targeted paths to help rebuild an economy that is suffering with high unemployment and downtown office vacancy rates. The deal was welcomed enthusiastically by such figures as Mayor Naheed Nenshi and Alberta Minister of Jobs, Economy and Innovation Doug Schweitzer.

Kim Furlong, president of the Canadian Venture Capital and Private Equity Association, said the Benevity transaction shows, “It doesn’t matter where you build it. if you have a great idea, and if you have an ecosystem that supports you, the capital will flow and the new way of connecting is actually accelerating that.”

Alberta government has recently put more focus on supporting its technology sector, after initially cancelling a program of tax credits directed at the industry. For examples, Ms. Furling pointed to the appointment of Mr. Schweitzer to his ministry and this year’s recapitalization of the Alberta Enterprise Corp., which invests in venture capital funds. But she cautioned, “They still have a lot of work to do [in Alberta] and they need to stay the course. This is not a four-year thing, this is not a political mandate delivery. This takes 12 to 20 years.”

This is third notable deal for Hg in Canada this year. In January it purchased a control stake in Montreal medical imaging software firm Intelerad Medical Systems Inc. and in October it bought a stake in Toronto accounting software firm CaseWare International Inc. for an undisclosed sum.

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