PennSpring Finds the Right Deal

Finding and winning the right deal at the right price is extremely difficult in today’s ultra competitive M&A environment. That’s why it was so fortuitous when PennSpring Capital found not only a deal right in its sweet spot, but one it was able to close earlier this year.

Founded in 2008, PennSpring Capital is a Lancaster, Pennsylvania-based firm that is comprised of a collection of families. The firm operates similarly to a private equity fund, but without outside limited partners and traditional hold periods.

A fairly new Axial member, PennSpring was actively looking to purchase companies in the platform-as-a-service (PaaS) space. The firm also has extensive experience in the education sector. When a deal to purchase Professional Systems Software & Technology (PSST), a national software company that provides data integration solutions for school districts and municipalities,  came across their desk via Axial’s network it was almost too good to be true.

“We have a strong interest in the K-12 space. PSST fits with what we have done. The deal was compelling and in line with our core competencies,” says Justin Davis, a Partner with PennSpring. “We have defined business services software as an area of focus, of which PSST is a great example. It was serendipitous that this deal not only had a recurring revenue model, and also a K-12 education focus.”

PennSpring has experience in the K to 12 space having owned Skyhawk Sports Academy, a sports company that works with schools and municipalities across the country, as well as First Serve Tennis Academy, which is now U.S. Sport Institute, a company that works with school and municipalities to teach tennis to youth. Under PennSpring’s ownership Skyhawk grew from working with 200 entities to 900.

PSST helps school systems and municipalities’ computer systems work together better. “For most school districts and municipalities the communication links between human resources, finance and payroll databases are negligible or non-existent. These systems don’t talk to each other,” says Davis. “There are people manually inputting information into multiple systems. It’s inefficient and it wastes taxpayer money. PSST brings down the walls between these silos, connecting disparate functions in an incredibly user-friendly fashion and saving real dollars for its customers in the process.”

Founded in 1990 by Larry and Connie Roach, the Louisville, Kentucky-based company has more than 300 K to 12 customers across 24 states, and with its municipal and corporate offerings has nearly 800 customers in 42 states.  The Roach duo was looking to sell because they were ready to retire.

Carl Williams, PSST’s president and CEO, is staying on with the company. Williams expects PSST’s relationship with PennSpring to help the company grow. “With PennSpring behind us we expect to further strengthen and extend our customer footprint, while also pursuing complementary product offerings that will enhance our bottom line,” he says.

New CEO Carl Williams is another reason this deal was right for PennSpring. The firm isn’t interested in replacing management when it acquires a company. “We don’t want to assert our will. We only want to do deals where people are energized to continue growing their business with the help of a partner. In the case of PSST, founders Larry and Connie Roach had a very deliberate, strategic approach, grooming their successor years in advance in order to ensure a bright future for the company. Carl is the ideal leader to maintain their vision, and further evolve the business model,” says Davis. The Roaches remain minority owners, with the goal of having a second bite at a larger apple down the road.  

PennSpring expects PSST to continue to grow. The company is readying to launch its integration platform as a services (iPaaS) product and Davis expects the company to demonstrate strong organic growth. PennSpring is currently working on helping PSST streamline business functions and gain significant market share in other geographies in the U.S. The company will also look for complementary add-on/tuck-in acquisitions.

“It’s a great opportunity for all of us. It was really a great fit in both competencies and culture. We are grateful that we were able to connect with the Roaches and team,” says Davis.