Blackbaud rejects Clearlake Capital’s bid to buy the philanthropy software developer

Good morning, Hubsters. MK Flynn here.

It’s a dramatic morning, as we watch closely to see whether or not a take-private of philanthropy software developer Blackbaud will come about.

Earlier this morning, Clearlake Capital filed a 13D about the proposal it made on Friday to acquire all of the outstanding shares in the software maker for $71.00 per share in cash, giving the company an enterprise value of $4.8 billion.

But then later this morning, Blackbaud issued a press release saying it was rejecting the bid: “The board unanimously determined that the proposal is highly opportunistic and significantly undervalues Blackbaud,” said the statement.

“Our board is committed to driving value for all stockholders and regularly reviews our strategy and evaluates opportunities to achieve that goal,” said Andrew Leitch, chairman of the board, in a statement. “Clearlake’s unambiguous statement that the firm itself does not need to be an acquirer is an overt attempt to put the company in play opportunistically. Most importantly, the proposal disregards the tangible momentum in Blackbaud’s business that we are confident will drive enhanced value for stockholders.”

Back in October, Blackbaud had adopted a stockholder rights plan, a.k.a. a poison pill, after Clearlake increased its stake.

Clearlake currently owns about 20 percent of Blackbaud and is the largest shareholder of the Charleston-based company, which aims to help organizations in the nonprofit and education sectors with fundraising, financial management, digital giving, grantmaking and other activities.

Clearlake’s bid is not an “activist move,” said a source close to the deal.

In Clearlake’s filing, the firm said:
“[Clearlake] fully support(s) and encourage(s) the company and its board of directors to undertake a thorough strategic review process with the assistance of its selected advisors, which we anticipate would culminate in a sale transaction to a strategic or financial partner and would maximize stockholder value,” according to the March 24 13D SEC filing. “Assuming the company conducts a thorough evaluation of strategic alternatives, Clearlake would also be willing to support a superior proposal in a transaction that maximizes value for all of the company’s stockholders.”

Blackbaud has faced challenges recently.

Earlier in March, the SEC announced that Blackbaud “agreed to pay $3 million to settle charges for making misleading disclosures about a 2020 ransomware attack that impacted more than 13,000 customers.”

“Public companies have an obligation to provide their investors with accurate and timely material information; Blackbaud failed to do so,” said David Hirsch, chief of the SEC enforcement division’s crypto assets and cyber unit, in a March 9 statement.
“Building off of a strong full year 2022, we continue to successfully execute our overall strategy and launched a number of key initiatives early this year that are already delivering results and support our overall objectives to manage the business efficiently and effectively, and drive profitability, increased revenue and cash flow,” said Mike Gianoni, president and CEO, Blackbaud, said in today’s statement. “We are pleased with the significant progress we have made on our Rule of 40 strategy through the start of this year and anticipate accelerated improvement through the remainder of the year. We look forward to sharing more about Blackbaud’s strong progress on our next earnings call.”

Take-private time
Despite the challenging economy and the Silicon Valley Bank drama, March has been filled with private equity-backed take-private deal announcements:

• Silver Lake and Canada Pension Plan Investment Board said they are buying customer experience management software developer Qualtrics for $12.5 billion.

• Apollo agreed to buy specialty chemical and ingredient distributor Univar for $8.1 billion, including debt.

• Blackstone said it would buy events tech provider Cvent from Vista for $4.6 billion.

We’ll be watching all of these developments, with more to share tomorrow.

Until then, happy dealmaking,

MK