Software and Technology Monthly Newsletter - June 2024

In This Edition:

• May 2024 In Review

• Canadian Venture Capital: 2023 Review

• May 2024 Market Dashboard

• Mergers and Acquisitions

  
  

May 2024 in Review

May 7 - TikTok sues the U.S. government over new laws forcing its parent, ByteDance to divest the app or face a ban across the U.S.

May 16 - Reddit forges partnership with OpenAI to bring its content to ChatGPT and to other products, while the latter will provide new AI features to Reddit’s forums.

May 21 - Retailer London Drugs confirms cybercriminals demanded a ransom for data stolen during a cyberattack in late April. The retailer said it is unwilling and unable to pay the ransom.

May 22 - The federal government will table its proposal to increase the inclusion rate on capital gains to the House of Commons before the parliamentary summer break.

May 23 - U.S. court overturns Shopify’s 2022 patent-infringement decision where Shopify was liable for US$40MM in damages for infringing on Express Mobile’s patents. 

Canadian Venture Capital: 2023 Review

We summarized 2023’s venture capital activity and capital deployment insights in Canada. We summarized several key findings below:

We believe the decline in deal activity from 2022 to 2023 was partly due to:

• Higher interest rates, which increases the cost of capital

• Less positive outlook by market participants based on the business cycle stage

• Higher tech valuations resulting in an investment shift towards more traditional industries at more appealing valuations.

VC investment was compared to the nation’s GDP over the past decade for further insights, as well as in comparison to select countries:

In comparison, other nations recorded the following VC investment as % of their respective GDPs:

Based on the findings above, we believe Canada would benefit from additional VC investment to maintain our nation’s innovation on a global scale. Some recommendations include:

Tax Incentives:

• The capital gains inclusion rate should be decreased rather than increased to further encourage investment.

• Consider the introduction of a capital gains relief for investments held over a longer period to encourage long term investments in start-ups.

Cut Red Tape:

• Streamlining fundraising regulations to reduce bureaucratic burden on investors and start-ups, enabling them to focus on innovation.

• Reduce cross-border investment regulations to encourage foreign investors.

Government funding:

• Various government levels to participate as investors, sharing both the potential risks and rewards.

• Increase grants for early-stage start-ups to further encourage investors concerned about early-stage risks.

  
  

Financing

We summarized a few tech financing transactions announced in May:

Market Dashboard - May 2024

Mergers and Acquisitions

May 1 – Maueme, OH based Aktion Associates acquires Calgary based Acumatica and legacy Sage practices of MNP. Acquisition of the Acumatica and legacy Sage practices from MNP with presence in eight provinces by national software reseller and IT infrastructure provid

May 7 – Vancouver based Quest Global acquires Princeton, NJ based People Tech Group. Acquisition of next-generation digital transformation and innovation company serving Fortune 500 clients to expand North American footprint within the automotive and hi-tech industries.

May 7 – TELUS (TSX:T) acquires Montreal based Vumetric Cybersecurity. Acquisition of cybersecurity provider specializing in advanced penetration testing to enhance security services portfolio.

May 10 – Calian Group (TSX:CGY) acquires UK based Mabway. $41MM acquisition of company offering management of defence-role playing environment simulations and technical engineering education for naval and maritime communities with over 1,000 personnel to complement military training and simulation offerings.

May 13 – Financial Solutions (NYSE:BR) acquires Toronto based Kyndryl's Securities Industry Services (SIS) wealth and capital markets technology platform. Acquisition of wealth and capital markets technology platform consisting of clearing and settlement, account record keeping, tax and regulatory reporting activities for financial services.

May 15 – Toronto based CPS Capital acquires CloudMD (TSXV:DOCRF). $12MM acquisition of health tech company with liquidity issues by private equity firm.

May 17 – San Francisco, CA based Battery Ventures acquires TrueContext (TSXV:TCXT). $150MM acquisition of field service workflow software company formerly known as ProntoForms.

May 21 – Montreal based Busbud acquires South African firm Ratality. Acquisition of revenue management optimization software provider for ground travel operators to build upon existing partnerships and extend geographic presence.

May 21 – Volatus Aerospace (TSXV:VOL) acquires Drone Delivery Canada (TSXV:FKT). Merger to create a global drone technology and services provider with efforts to begin commercialization post-closing.

May 22 – Open Text (TSX:OTEX) acquires Wichita, KS based Pillr. Acquisition of managed services provider platform from Novacoast that includes managed detection and response and threat-hunting capabilities to enhance cybersecurity offerings.

May 23 – Austin, TX based FileCloud acquires Ottawa based Signority. Acquisition of e-signature and document workflow platform provider to enhance portfolio capabilities.

May 28 – Arway.ai (CSE:ARWY) acquires Athens, GA based Map Dynamics. Acquisition of real-world mapping software company from Nextech3D.ai (CSE:NTAR) to expedite product development roadmap and add new revenue channels.