Insider Only Techopia

Software maker TrueContext acquired by U.S. private equity firm for $150M

David Sali

March 13, 2024
3:55 PM
ET

Organizations: Battery Ventures, ProntoForms, TrueContext

People: Alvaro Pombo, Philip Deck

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Ottawa-based software maker TrueContext Corp. is being acquired by U.S. private equity firm Battery Ventures in an all-cash deal valued at $150 million, the companies announced Wednesday. Battery Ventures will pay $1.07 per share for TrueContext (previously known as ProntoForms), a 52 per cent premium over the stock’s weighted average value over the past 60 days. The transition is expected to close in the second quarter pending final shareholder and regulatory approvals. Battery Ventures says it has entered into voting agreements with supporting shareholders and all officers and directors of the company, who hold a combined 76.4 per cent of TrueContext’s shares. Following the transaction, TrueContext’s shares will be delisted from the TSX Venture Exchange. The company will become a standalone entity under the ownership of Battery Ventures, a tech-focused global investment firm with offices in Boston, New York, Silicon Valley, San Francisco, Israel and London. TrueContext co-CEO Philip Deck said that while the company’s share price has risen 50 per cent over the past 12 months, management felt it needed investors with deeper pockets to finance its long-term growth plans. “The liquidity with shareholders when you’re this size is just not there anymore,” said Deck, who joined the company’s C-suite a year ago. “I think a lot of the shareholders were frustrated with that. We realized that we needed a strong shareholder base to execute the mission we’re on. Unfortunately, in the public markets, it’s rough. “I think this deal is kind of evidence that the company was worth more. It’s not fair to shareholders or employees who have options to always have a stock price that doesn’t reflect the true value (of the company).” Founded in 2001 by Alvaro Pombo, a former Newbridge Networks executive, TrueContext develops “low-code” custom mobile apps that allow field workers in heavy industries such as oil and gas to collect, send and receive data such as maintenance and compliance reports.

Rising revenues

The company went public on the TSX Venture Exchange in 2005. It changed its name to ProntoForms in 2013 before reverting to its original branding late last year. The firm originally targeted small and medium-sized businesses but shifted its focus to enterprise-level customers about seven years ago. In an interview with Techopia in early 2023, TrueContext executives said the company earned about half of its revenues from 150 or so multinationals that included Chevron, Shell, elevator manufacturer Otis Worldwide, and medical equipment powerhouse Philips Healthcare. The rest of its sales came from 1,500 smaller enterprises. TrueContext, which has about 135 employees, generated revenues of more than US$21 million in fiscal 2022, up from US$19 million the previous year. Still, management felt the company could do better. When he was hired last year, Deck said TrueContext was “just scratching the surface” of its potential, adding he wanted the company to be “more proactive” at marketing its software to enterprise customers and to penetrate deeper into verticals such as medical equipment. On Wednesday, he told Techopia a “misalignment of objectives” between shareholders who were focused on short-term returns and those who took a longer-range view of the company’s success hindered TrueContext’s ability to execute its strategic vision. “It’s difficult to get a great plan when you have different agendas and different needs among shareholders,” Deck said. “This (acquisition) unifies it. It gives us the opportunity to take our strategic plan and apply it over five years. We’re not just worried about next quarter and the quarter after.”

'Amazing partner'

Believing it was time for a different approach, management began talking last October to “lots of really well-experienced private equity companies,” Deck explained. “We had a really great response. When people did their research, one of the things they noted was that our customers said that we’re absolutely indispensable to their businesses. You can imagine prospective investors think that’s a great foundation to build more growth on to.” In Battery Ventures, Deck and Pombo think the company has found the ideal buyer. Founded in 1983, the U.S. firm has invested in hundreds of tech companies, including well-known entities such as employee review website Glassdoor, online marketplace Groupon and e-commerce vendor Wayfair. “Battery is an amazing partner,” Deck said. “They really know what they’re doing, they have a lot of expertise, they have lots of experience and they look long term at growth.” Reverting to private ownership means TrueContext’s leaders will have “more time to worry about customers and market” because they will no longer be required to take the objectives of public shareholders into account when making decisions, Pombo said. “We don’t want to be spending our time on the financial side,” Deck added. “We want to spend our time on the operating side.” In addition, TrueContext will now have the wherewithal to pursue potential acquisitions if the right situation arises, Dent explained. “That opportunity was not on the table for us as a public company with where our share was trading,” he said. “That's not the main part of our strategy, but it is something that’s now an option for us.” While some local tech industry observers have expressed concerns about the rising number of Ottawa-based tech firms that are now in foreign hands, Pombo said TrueContext’s new owners are committed to keeping the company in the National Capital Region and growing its local presence. “I think that’s a little bit of a red herring,” he said. “It comes down to, do you have the focus, the funds and the capabilities to grow your business? That’s what we have in Ottawa.”