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Charleston-based software firm files to go public
Feb. 1, 2004Charleston Post and Courier
By John McDermott
Blackbaud said its selling shareholders, not the company, would receive all proceeds from the proposed initial public offering.
In documents filed Friday with the Securities and Exchange Commission, the company did not say how many shares would be sold or at what price. Those and other details are expected to be spelled out in future SEC filings.
The company's controlling stockholder is San Francisco-based Hellman & Friedman Capital Partners III, which owns 42.4 million shares, or 62.5 percent of Blackbaud. The next-largest owner is Blackbaud founder and Charleston Battery majority owner Tony Bakker. He and his family control about 9.7 million shares, or 14.3 percent.
Robert J. Sywolski, president and chief executive since March 2000, has about 5.6 million shares in company stock options, which would give him a 7.7 percent stake, if exercised.
The company employs 780 workers in Charleston, Toronto, Scotland and Australia. Its local employees were notified about the IPO plan at a company meeting Friday afternoon in the atrium of its Daniel Island headquarters. Managers were sent electronic messages instructing them to gather their employees.
Speculation about a Blackbaud IPO first surfaced in 1999, when Hellman & Friedman and JMI Equity Fund acquired a controlling interest in the company from Bakker. "We do like taking companies public," Mick Hellman, a managing partner for Hellman & Friedman, said at the time.
The investors would have to wait. The public's appetite for new technology issues soured when the Internet bubble burst, causing the once-frothy IPO market to implode. Still, Sywolski said in an interview shortly after joining Blackbaud four years ago that going public would be an option sometime in the future.
Now, apparently, that time has come.
After three years of near dormancy, the IPO market is showing new signs of life. "The recent strong equity markets and the fact that venture capitalists have had more of a chance to work on companies before they try to go public has pushed activity upwards," said Todd Huxster of IPOVitalSigns.com, which tracks IPO activity.
Following the dot-com bubble, during which there were several hundred offerings annually, there have been fewer than 100 such deals in each of the last three years. But already in 2004 there have been 24 IPOs, more than twice the number for the first six months of last year. In the last week alone, six companies have gone public and another 15 have announced their intention to follow suit.
Huxster said the biotechnology, industrial and computer-related industries are leading the charge. He believes the market is more realistic now than during the heady dot-com era. "Today, companies need a financial history to go public because people aren't buying business plans anymore," he said.
Blackbaud's SEC filing provides a glimpse into the finances of the privately held corporation.
The filings show that the company's best year in terms of profit margins was 1998, when it earned $21.7 million on $65.6 million in revenue, for a 33 percent return. Net income was even higher the next year, when the company earned nearly $25 million on revenue of $92 million, though the margin was thinner.
Last year, Blackbaud posted a $478,000 loss, compared to a $15.6 million profit in 2002. At $118 million, revenue last year was up 12 percent. The company did not explain the reason for the loss.
The IPO documents, meanwhile, also disclosed the earnings of Blackbaud's five highest-paid executives. The company's top earner was Sywolski, whose cash compensation totaled $1.1 million last year, including a $525,000 salary and a $558,736 bonus. The pay packages for the other executives ranged from $374,498 to $424,978.
Blackbaud's name is a combination of the words "blackboard" and "baud," a term that refers to the measurement of the speed with which data travels over phone lines.
The company's specialty is developing fund-raising financial software for charities, arts groups, schools and others in the nonprofit sector.
It traces its roots back to 1981 in New York City, when U.K. native Bakker answered an advertisement placed by a school there that needed a computerized billing program. He landed the job and designed a program that tracked tuition and accounts.
That job led to referrals, and eventually Bakker's software program would evolve into the Raiser's Edge, which would become Blackbaud's industry calling card and its top-seller.
In 1989, Bakker moved the business to the Lowcountry from New York, initially to Mount Pleasant and later to North Charleston as his workforce expanded. "The office space costs seemed good," Bakker said in 1996. "The salaries were reasonable."
In 1997, the company snapped up its biggest competitor, Master Software of Indianapolis, doubling its customer base, which now numbers about 12,500. Soon after, Blackbaud closed the Indianapolis office and announced it would centralize into a newly built headquarters on Daniel Island.
Bakker, who stepped down as CEO in 1999 after selling most of the business to outside investors, maintains business relationships with Blackbaud outside of his stock holdings.
Blackbaud pays $4.3 million a year to lease its 150,000-square-foot headquarters building from a company that is 60 percent owned by Bakker. Also, it pays $200,000 a year to have its name on the home stadium of the Charleston Battery professional soccer team, of which Bakker is principal owner. That promotional agreement is scheduled to expire in October 2009.
Blackbaud has applied to list its shares on the Nasdaq National Market exchange under the symbol "BLKB."