Cox Enterprises Strikes $1.8 Billion Deal for Government-Software Provider
The following is a copy of an article published on the Wall Street Journal on February 27, 2024. The full article can be found here.
Cox Enterprises is buying OpenGov in a deal that values the provider of software for cities and state agencies at $1.8 billion.
Cox, a big family-owned provider of communications and automotive services that already held a big minority stake in OpenGov, is buying the rest, according to executives of the companies.
OpenGov’s management and employees will roll over a significant portion of their equity into the deal and the company will be run by its existing leadership under the Cox umbrella.
Closely held OpenGov, based in San Francisco, has built a software platform since its founding a dozen years ago that helps with budgeting, accounting, asset management and other local-government needs.
The city of Los Angeles is using OpenGov to prepare for the 2028 Summer Olympics, while a county in Oregon is using it to try to combat homelessness, by getting cash distributed more quickly in the community.
Atlanta-based Cox, a roughly 125-year-old outfit with about $23 billion in annual revenue, has a history of ponying up for a variety of companies—many with local-market expertise—from online-car marketplace Autotrader to news and technology provider Axios.
Its Cox Communications business is the third-biggest cable provider in the U.S., with 6.5 million customers. Cox Automotive, its other business vertical, owns the Kelley Blue Book brand, among others.
OpenGov’s board includes Silicon Valley heavyweights Marc Andreessen, the venture capitalist; Joe Lonsdale, co-founder of Palantir Technologies; and John Chambers, former chief executive of Cisco Systems. The new OpenGov board will be a mix of Cox and OpenGov leaders.
The deal will allow OpenGov to speed up product development and make more acquisitions, the executives told The Wall Street Journal.
Zac Bookman, co-founder and CEO of OpenGov, said it also would allow OpenGov to make longer-term decisions, including bold bets on mergers and acquisitions. “We want to empower a more effective and accountable government,” he said.
Some of the challenges the company hopes to tackle under Cox include an increased risk of cyber and ransomware attacks and a growing talent gap as the workforce retires, said Bookman, who is set to remain OpenGov CEO.
Dallas Clement, president and chief financial officer of Cox, said OpenGov is at the forefront of the acceleration of a cloud and artificial-intelligence transformation within governments.
“We developed a thesis around government software,” he said. “The tech is still largely on premise—not on the cloud, let alone anything with AI or mobile apps.”
OpenGov had a 76% year-over-year increase in gross new sales in the fourth quarter. Fueling that growth was a deal the company announced in 2022 to buy Cartegraph, which makes cloud software for public-agency operations and infrastructure-asset management.
The acquisition is the largest venture-backed software exit in recent memory, at a time when acquirers have been scarcer during a slow period for M&A. The once-booming IPO market for hot startups has also cooled, making it harder for such companies to sell stock to the public.
OpenGov was advised by Tidal Partners and law firm Wachtell, Lipton, Rosen & Katz. King & Spalding served as Cox’s legal adviser.
