Exclusive: Renovus Capital acquires govtech provider QualX

Renovus Capital Partners expects to announce later Wednesday the acquisition of QualX Corporation, a Springfield, Virginia-based provider of information management services to government agencies, PE Hub is the first to report.

Ahead of the deal announcement, PE Hub caught up with Manan Shah, a partner at Renovus, to discuss opportunities that attracted the Philadelphia-headquartered company to QualX.

What does QualX do?

QualX Corp was founded in 2009 by Alan Moon, a retired US Army Colonel, to provide agency-level strategic planning and policy development, information management, enterprise IT, program management and business process improvement support services to the federal government.

The company specializes in full scope records and information management (RIM) services, including all forms of information access analysis, image and data capture, electronic information governance, records disposition, systems administration and helpdesk support, website development and maintenance, data storage and retrieval , and other RIM mission support services.

Records management and information management are the largest segments of the business.

Walk us through the sale process.

The deal was introduced to us by Monument Capital Partners, an investment bank based in the DC area that represented the seller. The company was for sale. DLA Piper was Renovus’ legal counsel and Greenberg Traurig was the seller’s legal counsel.

What trends are driving demand for govtech?

There is a large opportunity within the entire federal sector associated with records management and information management. A significant portion of agency records are still in print form and need to be digitized and eventually declassified and stored at NARA (National Archives and Records Administration).

There is a significant increase in Freedom of Information Act (FOIA) requests with the increase in the volume of records being created these days. This creates a significant opportunity for QualX to be able to provide their unique capabilities enabled by their proprietary technology. Additionally, there are opportunities related to data aggregation, data analytics and utilization of AI to provide for further automation in this field.

What’s your growth strategy? Are add-on deals in the works?

We are looking to continue expanding QualX’s core technology platform that facilitates some of their core offerings in declassification and FOIA. We are looking to expand the company’s strong Department of Defense footprint into federal civilians, as well as the intelligence sector.

Ultimately, we look to build each of our portfolio companies into a mid-size company with a few hundred million dollars in revenue and double-digit EBITDA margins. We expect to accomplish this both organically and through strategic acquisitions.

Renovus has extensive experience growing our portfolio companies through M&A. Our strategy will involve acquiring companies that complement QualX’s current customer base, as well as augmenting their core capabilities in analytics and digital transformation. We have identified a robust pipeline of opportunities and have begun discussions with some parties. As we’ve just completed the platform acquisition, it’s premature to name any potential targets.

How does QualX represent your investment thesis?

At Renovus, we look for founder-owned businesses that have reached an inflection point in their growth cycle and can benefit from a partnership with a company like us.

Our portfolio companies have achieved greater scale through additional investments in technology, people, infrastructure and acquisitions. QualX’s business has developed a strong foundation that can benefit from such additional investments and accelerate its growth.

How does QualX fit into your portfolio?

The government sector is a core part of Renovus’ investment strategy. Our portfolio currently includes Aretum, Insight and Deep Water Point & Associates as other platforms in this sector. All these businesses were founder-owned prior to our investment and had not taken in any outside investment group capital when we partnered with them. Through our partnership, we are growing these businesses from small businesses into larger unrestricted businesses.

What returns are you expecting from this deal?

In general, we always seek to generate attractive returns from our investments. We cannot speculate about specific targets, but we are very enthusiastic about the QualX opportunity.