Blackbaud's (NASDAQ:BLKB) $16 per share deal to acquire Convio (NASDAQ:CNVO) translates into an enterprise value that is slightly below that projected by our March 2011 SaaS valuation model, but is still within about 10% of the target. We believe the price reflects Convio's relatively small revenue of $77 million and subpar growth, profitability and efficiency, as measured by the MGI Index (CNVO's MGI Index is 643). In our view, the valuation offered is also a function of a dearth of potential buyers in this space. BLKB paid a 49% premium vs. the last closing price for CNVO, but still seemingly got a good deal.
BLKB, with an MGI Index of 842, is the dominant vendor of on-premise software for the nonprofit market, and enjoys a firm and profitable position in this space. Yet even after a few acquisitions of SaaS and SaaS-like companies, BLKB still lacked a compelling SaaS solution. Convio brings to BLKB a pure play SaaS alternative that will help BLKB refine its strategy in this space.
This deal may raise some anti-trust concerns even given the small numbers involved. The cultural fit between the two companies -- a Mount Pleasant, South Carolina-based Blackbaud and venture-backed, Austin, Texas-based Convio, is also in question.
This deal and other recent transactions such as IBM/DMAN, SAP/SFSF, ORCL/RNOW, - provide reminders of the costs inherent in scaling up SaaS businesses to critical mass.