PureFacts Financial Solutions Inc., a Toronto software company that helps wealth managers track and process their revenues, has been sold to a New York private equity company.
GrowthCurve Capital bought majority control of PureFacts in a deal valuing the company at $250-million, according to two sources familiar with the deal. The Globe and Mail is not identifying the sources as they are not authorized to discuss the matter. The seller and buyer did not disclose the terms when they announced the deal on Thursday.
Management, including CEO and co-founder Rob Madej, rolled over a significant but undisclosed amount of their shares in the deal. Past equity investors Round13 Capital and Canadian Business Growth Fund (CBGF) sold out, Mr. Madej said in an interview.
Three years ago, PureFacts would have been the kind of company Canadian investment bankers would have heavily courted to go public as stock-market valuations skyrocketed for promising, steadily growing software companies during the pandemic.
Now, they are in the sights of deep-pocketed private equity companies as valuations for tech stocks remain depressed nearly three years after they began to slump.
“We got a lot of inbound interest” from private equity players before hiring Bank of Nova Scotia, the company’s lender, to run a deal process, Mr. Madej said.
PureFacts is a low-profile Canadian success story with 150 employees and 130 customers globally including Royal Bank of Canada, Fidelity Investments, Schroders, BNY Mellon, Canada Life Assurance and Dimensional Fund Advisors. The company derives 70 per cent of its revenues from outside Canada.
The profitable company typically grows at between 15 per cent and 30 per cent a year and generates about $40-million in revenue, giving it a combined revenue growth rate plus operating profit margin of more than 40, Mr. Madej said. Subscription software companies that deliver that threshold of growth plus profitability are called “Rule of 40″ companies, a mark of elite performance in the information-technology sector.
Mr. Madej started the company in 1997 with his brother (who later sold out of the business) with a goal of building software solutions for financial institutions. Bay Street fund manager Burgundy Asset Management, an early client, asked the startup to build a program to automate and manage fee billing and adviser payouts for clients, and suggested it could easily resell the product to dozens of other wealth-management companies, which proved to be true.
The business was self-financed until PureFacts raised $20-million from Bank of Nova Scotia (BNS) and Round13 in November, 2020, to help fund an acquisition. It raised another $37-million in equity and debt a year later from CBGF, BNS and Round13, to accelerate product development and fund further acquisitions.
Round13 founding partner Bruce Croxon said PureFacts had managed the recent tech downturn relatively better than many other private companies by getting more efficient as it pursued revenue expansion.
He described the company as “a steady grower with very little churn. Once they knock down a financial institution as a customer there was no real good reason to lose them and PureFacts turned out to be very good at delivering what they promised.”
Mr. Madej said PureFacts has broadened out in recent years to offer what he calls “end-to-end revenue management” to his wealth-management clients, providing a reporting and analytics engine that mines client data to help the companies with growth strategies.
He said GrowthCurve emerged as the favoured company in the auction process because of the buyout company’s entrepreneurial nature and its partners’ experience working with AI and data analytics in the wealth-management field. “We felt they’d be the perfect partner to help us scale” and increase revenues by five to 10 times.
“PureFacts is exactly the type of company we look for in making strategic investments,” Sumit Rajpal, GrowthCurve founder and CEO, said in a release. “We look forward to helping accelerate the company’s growth trajectory.”
Mr. Madej, 55, said he plans to continue running the company “because we believe there is a lot more to come here. Everybody is so excited about building a great Canadian company that’s global.”