Blackbaud Acquisition Ups Its Position in Higher Ed

Blackbaud took another step into the higher education technology and fundraising market, acquiring Reeher, a St. Paul, Minn.-based predictive modeling platform for colleges and universities. The sale price was $40 million.

Blackbaud plans to expand those capabilities to markets outside of higher education that have a major gift officer and annual fund functions.

Blackbaud currently has operations in nearby Minneapolis, Minn., and will evaluate operations of the two offices as part of the process of integrating the two companies, according to Amy Lucia, Blackbaud’s vice president of corporate marketing. Approximately 65 employees of Reeher, including Andy Reeher who founded the firm in 2002, will become part of Blackbaud.

Today’s announcement comes a day after the Charleston, S.C.-based fundraising software firm reported first-quarter revenue of $204 million, up 10 percent and on track for full-year projections approaching $900 million. Recurring revenue hit 89 percent, a new all-time high for the company.

Blackbaud granted a one-time stock award in February to eligible employees, equivalent to about $2,000, which will vest in one year.

During the conference call with analysts, CEO Mike Gianoni said Reeher was acquired for approximately $40 million. The Minneapolis/St. Paul Business Journal pegged the sale price at $43 million. CFO Anthony Boor said during the call that revenues from Reeher are immaterial overall but that Blackbaud “paid a similar multiple to what we’ve done with similar acquisitions.”

Reeher is the seventh acquisition for Blackbaud since Gianoni became CEO in January 2014, totaling about $500 million in all:

“We see lots of opportunity in higher ed obviously,” Gianoni said in response to a question during yesterday’s call about the firm’s strategies for the higher education market. “As we think about acquisitions in general like this, it’s through a lens of strategy by vertical business unit. That continues. There’s always a pretty big pipeline of like-sized business that will continue to feed one of our strategies, which is TAM [total addressable market] expansion in particular vertical business units where we have a focus. This one happens to be in higher education. Frankly, this one we think will spread beyond higher education for us as well, given the other verticals that we have. So we think it’s applicable to more than just higher ed,” he said.

The current estimated total addressable market (TAM) is about $8.2 billion, according to Blackbaud’s 2018 10-K filing with the Securities and Exchange Commission (SEC).

Reeher has been pursuing a strategy to expand its market over the past four years, and last fall began a process with investors to find a partner to help the firm grow faster and serve more customers, Reeher wrote in a blog post announcing the deal. “While we considered a range of options from new financial investors to strategic combinations, at the end, we determined that joining forces with Blackbaud was the best way to accomplish our mission, care for our customers, and provide opportunity for our employees,” he wrote.

Reeher’s platform already is integrated into several Blackbaud solutions, according to Gianoni. “This is again just an advancement of capabilities for us, initially in higher education and then in a few other vertical markets as we move throughout the year,” he said.

There is some overlap within the higher education customer base but it’s not a high percentage, according to Gianoni. “The bigger opportunity is to pull their solutions to our existing customer base in higher education and then attach that solution to existing prospective customers as well because it strengthens our position at the really high end of the market which I would describe as power users or major gift officers,” he said.

“It’s a really cool platform that really uses analytics to drive performance. You can think of the platform as a team-based platform for a major gift officer team, to drive that team’s performance and it also pulls data from multiple customers, so that team can compare their performance to industry performance. And that’s really the basis of what this is about.”

Blackbaud employs almost 3,200 people globally, with about 1,300 based on Daniel Island in Charleston, S.C., where the firm is constructing a new, $154-million, 360,000-square-foot headquarters complex.

Blackbaud opened trading this morning on NASDAQ at $104.96 per share, with a 52-week range between $75.93 and $116.07. Shares were up 11 percent since the start of the year, and up 31 percent over the last 12 months, but down 5 percent during early morning trading today.