Blackbaud Buys eTapestry

August 6, 2007       Paul Clolery      

Nonprofit software provider Blackbaud has made its second major acquisition this year, buying online donor management and advocacy tool eTapestry. During the past two years Blackbaud has spent more than $90 million on acquisitions in the nonprofit software and advocacy marketplace.

The eTapestry deal further consolidates the online advocacy message delivery and fundraising market. Convio in Austin, Texas acquired GetActive Software of Berkeley, Calif., earlier this year.

Blackbaud will pay $24.8 million for eTapestry and up to another $1.5 million under a two-year, stock-based performance incentive arrangement. eTapestry had unaudited revenue of approximately $7 million for 2006, according to a Blackbaud spokesperson. The company did not make any of their executives immediately available for interview but did provide statements.

Blackbaud financed the deal through a combination of cash and borrowing from its credit facility. The deal was announced at the close of the trading day at the New York Stock Exchange, where Blackbaud shares opened the day at $20.94, down $7.02 from its 52-week high. A closing price was not immediately available. Before the deal, Blackbaud’s Market Cap was $939.2 million. Its fiscal 2006 revenue was $191.3 million.

eTapestry, based just outside Indianapolis, Ind., developed one of the first Software-as-a-Service (SaaS) offerings built specifically for nonprofits. SaaS means that the software resides at the vendor and all transactions are done online.

eTapestry’s flagship offering is its on-demand fundraising solution, basically software that can be accessed remotely. Through its strategic partners, eTapestry offers services, such as online giving and donor prospecting. eTapestry customers do not pay the large up-front costs or the ongoing maintenance and support fees typically paid in the use of more traditional software.

eTapestry reportedly has more than 3,000 customers of its on-demand services, with donor records ranging from several hundred per organization to more than 300,000.

The acquisition moved Charleston, S.C.-based Blackbaud more completely into the fundraising arena. Its software products were steeped in accounting and donor management. Earlier this year, Blackbaud acquired Target Analysis Group for $60 million. The Cambridge, Mass.-based Target has donor management software but also has a donor research, database operation and fundraising consultancy.

Tim Williams, Blackbaud’s chief financial officer, said in a prepared statement that in addition to the strategic reasons supporting the acquisition of eTapestry, the deal is attractive from a financial perspective. “Specifically, Blackbaud will be adding another high-growth, subscription-based revenue stream from an on-demand service offering. The combination of eTapestry, Target Software and Blackbaud’s previously existing subscription revenue sources represent the highest growth revenue line in our business. The growing portion of Blackbaud’s revenue that is coming from recurring sources, combined with its very strong cash flow, provides the company with a very attractive business model.”

Not only do the purchases solidify Blackbaud’s position in the software and technology space, but the acquisitions makes them competitors of firms such as Epsilon in Wakefield, Mass., and Merkle:Domain in Lanham, Md., which have large nonprofit database operations.

This is Blackbaud’s second largest acquisition. During 2006, the firm purchased software provider and competitor Campagne Associates for more than $6 million. The largest purchase prior to that was in 1997 when it acquired Master Software Corp.

Master Software, coincidentally, was owned by the same people who founded eTapestry a few years later when their non-compete agreement expired.

eTapestry will continue operations as a wholly-owned subsidiary in Indianapolis. The 85-person company will continue to be led by Jay Love, co-founder and currently CEO of eTapestry. Love previously served as a sales and marketing consultant at Target Software, as well as president and chief executive officer of Master Software Corporation. John Moore, eTapestry’s co-founder and vice president of development, and Steve Rusche, eTapestry’s co-founder and COO, both plan on continuing in their roles with eTapestry as it becomes part of Blackbaud.

Marc Chardon, Blackbaud’s chief executive officer, said the acquisition “provides Blackbaud with a best-of-breed, on-demand fundraising solution that is ideally suited for smaller organizations interested in an easy-to-deploy and relatively low cost offering, as well as mid-sized nonprofits interested in a stand-alone fundraising solution deployed in an on-demand model.”

Chardon added, “This acquisition opens up a market opportunity that Blackbaud was not actively addressing. Combined with the robust functionality of Raiser’s Edge and our integrated suite of solutions, we believe that Blackbaud is now positioned to meet the fundraising needs of all nonprofits, irrespective of their size or approach to technology.”

eTapestry will probably be Blackbaud’s lowest entry point, starting at $200 per month. That’s compared to Blackbaud’s The Raiser’s Edge which starts at approximately $6,500.

Chardon added, “From a long-term perspective, we believe that Software-as-a-Service offerings in the nonprofit sector will grow in importance. With the acquisition of eTapestry, we have positioned Blackbaud to participate in an early-stage, high-growth trend with a company that has a proven solution, customer base and growth track record. In addition, Blackbaud adds significant domain expertise in the nonprofit sector and on-demand market.”

Love said, “Today’s announcement is great news for our customers and employees, as we are combining eTapestry’s thought and market leadership in on-demand fundraising solutions with Blackbaud’s significant resources and far greater critical mass. The products and target markets of both companies are highly synergistic.”

According to the company, approximately 19,000 organizations use one or more of Blackbaud products and services for fundraising, constituent relationship management, financial management, direct marketing, school administration, ticketing, business intelligence, Web site management, prospect research, consulting, and analytics. Headquartered in the United States, Blackbaud also has operations in Canada, the United Kingdom and Australia.

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