Software maker pays $60M in cash to broaden nonprofit market reach

Blackbaud Inc., the Charleston-based software maker, said Tuesday it paid $60 million in cash to buy two private companies that also build technology for nonprofit fundraising groups.

The newly acquired businesses, Cambridge, Mass.-based Target Software Inc. and Target Analysis Group Inc., employ about 200 workers and collected about $20 million in revenue last year.

Formed in 1992, Target has sold its fundraising software and services to a long list of blue-chip nonprofits, including the American Civil Liberties Union, Greenpeace, the Nature Conservancy and the Special Olympics. Target markets its product as "the only fundraising and relationship management software built for sophisticated nonprofits."

Blackbaud spokesman Dennis Maxwell said the acquisition will help the larger Lowcountry company win business with bigger organizations that focus on collecting smaller donations. "Basically, Blackbaud's software is designed to help a nonprofit deal with its major donors - people who give $1,000 or even $100,000," he said. "But a lot of people write checks to the ACLU for $10."

Target mails fundraising pitches to millions of donors and analyzes giving patterns on a similar scale. Some of the country's biggest nonprofits use both Blackbaud and Target software. "It broadens our ability to serve the full scope of the market," Maxwell said. "We occasionally crossed swords with Target, but not a lot."

Target executives did not respond to requests for comment.

Although Blackbaud boasts some 15,000 clients, in recent years it has maneuvered with some success to win business from larger organizations. Blackbaud created a special sales team to target the country's huge nonprofits and its average sale climbed to $40,000 in the third quarter of last year, compared with $30,000 in 2005.

Blackbaud said it will not cut any jobs or relocate any of Target's employees in Massachussets. Target's founder and chief executive, Chuck Longfield, will be named chief scientist at Blackbaud. Lee Gartley, Target's president, will also join the executive ranks at the Daniel Island-based tech firm.

Blackbaud paid more than $60 million in cash for the new unit, including an unspecified amount of loans. Blackbaud will pay Target an additional $2.4 million if it reaches certain profit levels in the next year. At the end of the third quarter, Blackbaud had $54.3 million in cash. It said the acquisition would lower 2007 profit by 3 cents to 6 cents a share.

Although Blackbaud reaffirmed its fourth-quarter earnings guidance, it said its revenue from new software sales will be slightly below its predicted range. A few deals the firm was working on did not close by year-end, according to Maxwell. Blackbaud's earnings are scheduled to be released Feb. 5. The Target buyout was announced near the end of trading Tuesday. Blackbaud shares fell 10 cents, or less than 1 percent, to close at $24.90 in lighter-than-normal trading on Nasdaq.