BC Business
The acquisition of Vancouver company Galvanize coincides with a shift in the world's boardrooms that should boost demand for its governance, risk and compliance software.
Galvanize CEO Laurie Schultz has reinvented the company since taking charge in 2011
When Laurie Schultz joined what is now Galvanize as CEO in 2011, some people were skeptical about the business, she remembers. Then called ACL Services, the Vancouver-based audit analytics software maker had been struggling, so former chief executive Harald Will asked Schultz to take over. “A lot of folks in town kind of thought we’d missed our time,” she says. “We were born in the UBC system in 1972; we were incorporated in 1987. And so that’s a long time for a tech company.”
As it turns out, the naysayers were dead wrong. Today, about 6,000 customers in 130 countries use Galvanize’s governance, risk and compliance (GRC) platform. The company’s reinvention under Schultz caught the eye of Diligent Corp., the U.S. board management software giant, which recently announced that it’s acquiring Galvanize for a reported US$1 billion. This tie-up comes as more and more organizations turn to software as a service (SaaS) for their GRC needs.
“It was a lot about creating belief then,” Schultz says of her early days with Galvanize, which moved to a subscription model seven years ago. “And we had integrity of intent. We gave our employees authorship of our destiny, and then we lived up to our word.” The company, which now has 455 staff at 11 offices worldwide, rebranded under its current name in 2019.
The deal “is starting to sink in now,” says Schultz, who expects it to close at the end of March. “We’re getting to know each other a little bit better, and employees are pretty excited.”
By marrying the client bases for their respective SaaS offerings, Galvanize and New Yorkheadquartered Diligent will have a combined valuation of US$7 billion and become the world’s largest GRC business, Schultz says. Diligent also just purchased San Franciscobased Steele Compliance Solutions, a specialist in ethics and compliance SaaS.
“The Galvanize team has an exciting amount of depth around audit and risk, and some compliance, and the Steele Compliance team has an incredible amount of depth around ethics and compliance,” says Diligent CEO Brian Stafford. “And so it’s an awesome opportunity to fill out the most broad next-gen solution for governance, risk and compliance.”
Asked how the deal came together, Schultz says she first met Stafford two-and-a-half years ago. “It was just a casual reach-out, exploring the opportunity to integrate more from a partnership perspective.” The two chatted again in early 2020, when the start of the COVID-19 pandemic prevented them from meeting face-to-face. “It re-instigated the interest in looking at how our companies could combine to have a much bigger impact,” says Schultz, who adds that she and Stafford began talking more seriously last June.
Around the world, some 800,000 board members, CEOs and CFOs at 19,000 companies use Diligent’s applications for governance tasks such as secure communication, voting and director evaluations, Stafford says. “What we’ve found from our clients’ perspective is, as much as boards care about the performance of the company whose board they sit on, they’re equally focused on risk and how you can mitigate the risk for an organization to make sure that organization can stay out of trouble and really thrive.”
With that in mind, Diligent had been looking to make an acquisition in the risk space, Stafford says. “We have admired what Laurie and the Galvanize team have built for a long time, and we got really excited about the opportunity to team up.”
“The goal is to leverage this team and to expand it,” Schultz says of Galvanize’s role in what’s next. “We’ve got a very strong customer success team, for example, and I think there’s going to be a ton of opportunity for people, not just selling incumbent Galvanize technology but now selling the combined footprint.”
But the company will see changes, too, she adds: “There’ll surely be some opportunity for efficiencies and integration of some of our back-office teams.”
What does the deal mean for boards and GRC specialists? “For our customers, be they auditors or chief information security officers, their goal, of course, is to create visibility for core risks at the boardroom table, and some are more effective than others,” Schultz says. “I think from a board perspective, maybe this takes some of the guesswork out.”
With millennials moving into director roles, there will be an even greater appetite for technology in the boardroom, Schultz reckons. “I think we’ll really accelerate the value that boards can bring, because they’ll have unfiltered, technology-enabled access to critical risks that live in the business and the people that are accountable for mitigating those.”
At the same time, the mandate of boards has changed, Schultz says, as part of a move toward what Diligent calls modern governance. Where baby boomers have traditionally taken a profit- and control-centric approach to boardroom management and Gen-Xers tend to focus on customers and revenue, millennials are more self-actualized, she argues.
“They’re going to care a lot more about the social agenda, and I do think that really colours how a boardroom conversation is shifting,” Schultz says. “Still focused on financial controls and customer experience, but the ability to speak to diversity and climate change and ethics—those things colour a boardroom conversation, and our technology enables that conversation.”
Over the past five years or so, Diligent has seen boards face pressure to get more involved in the companies they direct, Stafford observes. “Whether it’s threat or pressure from activist investors, whether it’s threat or pressure from regulators, whether it’s threat or pressure from employee groups, whether it’s a new type of shareholder organization like ESG-focused investors, the role of a board and expansion of responsibility of a board continues to grow.”
As a result, directors must do more than attend quarterly board meetings, Stafford says. “The best way to address that is with data/information analytics to make sure that boards are up to speed, they’re more connected to the company’s purpose and what the company does to be successful. That’s an overall trend that we’ve been riding to a good amount of growth, and we expect that trend to only continue, to grow in importance. And that’s part of the reason making sure that we’re investing in capabilities in an area like risk is so important.”
As the SaaS model has made it easier to access GRC software, boards are coming to depend on tools like those offered by Galvanize and Diligent to make strategic decisions, says Rajesh Vijayaraghavan, an assistant professor in the accounting and information systems division UBC Sauder School of Business. For organizations, growing complexity is driving that change, Vijayaraghavan notes, citing potential risks created by the shift to working at home.
Vijayaraghavan, who used to work in risk management at a bank, stresses that measuring risk accomplishes nothing unless the results get reported to the right person. “For that reason, boards are going to be increasingly relying on information that is produced through GRC platforms just so that they are aware of the risk.”
Also, to take action on a specific risk, companies need reliable information. “If a board has to act, they can’t just ask based on a gut feeling they might have,” Vijayaraghavan says. “These platforms, in a way, give them an objective way to come to a decision.”
What role will Schultz play in the merged business? The starting point is to fold Galvanize into the larger company intact, she replies. “As an investor in Diligent, I’m committed to making sure I’m in a place that I can add the most value,” Schultz says. “But right now, my focus is just trying to keep everybody focused on the day-to-day and move in with our new partners.”
Asked how she feels personally, Schultz is understated—and quick to credit her team. “We’re modest as an organization,” she says. “We’re not pounding our chests. And it feels so great that normal people have been able to achieve this outcome by doing the right thing, and by believing and by embracing what they didn’t know. And so I think we’re all sitting here with pride and gratitude, and anticipation of what this new phase of our journey looks like.”
She also praises Vancouver’s technology ecosystem. “We have a lot of diversity, and for us, it’s the backdrop of why we’ve been so successful as a global business.” Galvanize isn’t the first local tech company to go through such event, Schultz notes, pointing to business intelligence software developer Crystal Decisions, which France’s Business Objects acquired in 2003. “I think we will incubate a whole generation of new entrepreneurs into Vancouver tech, as Crystal did. And so that experience is something that I think creates a lot of opportunity for employees.”
Whatever happens, no one doubts Galvanize anymore. For Schultz, the outreach from the community has been remarkable, she says. “It’s just great to illustrate that this is possible, and I’m really grateful to have been part of this and to share it with so many friends.”