Blackbaud buys EVERFI for $750 million in its biggest acquisition yet

Blackbaud Inc. has made the biggest acquisition in its history, paying about $750 million for EVERFI, a Washington, D.C., company whose digital education programs help businesses meet their social responsibility goals.

The Daniel Island software company announced the cash-and-stock deal after U.S. financial markets closed Monday, The Post and Courier reported. The purchase closed Dec. 31, according to a filing Blackbaud made with federal securities regulators.

Blackbaud is paying about $450 million in cash and 3,844,423 shares of its common stock, valued at about $300 million, the company said. It borrowed $435 million on Dec. 31 to help pay for the deal, including $250 million in new term loans and $185 million from its revolving credit line, according to the filing.

Blackbaud said it expects pro forma net leverage of about 3.4 times at closing and anticipates paying down debt quickly, driven by strong free cash flow.

What EVERFI does

EVERFI, founded in 2008, sells what it calls “Impact-as-a-Service.” Its cloud-based software and digital lessons help companies, governments and nonprofits address issues such as financial wellness, mental health and workplace conduct through education, according to Blackbaud’s announcement.

The company says its programs have reached more than 45 million learners. Its early investors included Amazon founder Jeff Bezos, Eric Schmidt of Google and Twitter founder Evan Williams, along with firms including TPG Growth and The Rise Fund, according to Blackbaud.

EVERFI’s more than 2,000 customers include major financial institutions, foundations, sports organizations such as the National Football League and K-12 public schools, The Post and Courier reported. The company employs about 550 workers, according to its website, the newspaper reported.

Why Blackbaud wanted it

Blackbaud said the deal doubles its total addressable market to more than $20 billion and puts more than half of that opportunity in the corporate sector.

EVERFI is expected to add about $120 million in revenue in 2022, growing at nearly 20% a year, the company said. Blackbaud plans to cross-sell EVERFI’s products with its YourCause offerings for corporate customers, and it said the two companies both have substantial penetration with Fortune 500 customers but little customer overlap. In education, EVERFI’s strength in public K-12 schools complements Blackbaud’s presence in private K-12 schools and higher education.

“As companies continue to invest further in ESG and CSR programs to both give back and meet regulatory demands, they need a partner who can help connect their philanthropic goals to meaningful social impact opportunities,” CEO Mike Gianoni said in the announcement, referring to environmental, social and governance and corporate social responsibility programs.

“I am very confident that the combination … adds tremendous value to a very large and fast-growing market, which will accelerate our growth, pull our long-term financial goals forward and create value for our shareholders,” Gianoni said, The Post and Courier reported. He also discussed the deal with financial analysts on a conference call Tuesday, according to the newspaper.

EVERFI founder and CEO Tom Davidson and his executive team will join Blackbaud to focus on expansion, the company said.

“Blackbaud and EVERFI have similar cultures and a strong sense of purpose,” Davidson said in the announcement. He added that EVERFI’s software “powers some of the largest ESG and CSR initiatives in the world, and this alignment will drive impact for millions of learners every year.”

Investors’ reaction

Blackbaud shares fell about 4% to $75.96 in late-afternoon trading Tuesday before trimming their loss to about 1.6% to close at $78.08, The Post and Courier reported.

EVERFI’s expected revenue would amount to roughly a 13% boost from Blackbaud’s latest estimate of $920 million in 2021 sales, the newspaper reported.

The purchase is Blackbaud’s first in about three years, since it bought employee engagement software company YourCause for $157 million, according to the newspaper. Its previous biggest acquisition was Texas-based Convio in 2012, which The Post and Courier reported cost $335 million.

Goldman Sachs advised EVERFI, and DLA Piper was its legal counsel. Sidley Austin represented Blackbaud.

Next steps

Blackbaud reaffirmed the 2021 outlook it gave in November and said it will give a 2022 forecast that includes EVERFI when it reports fourth-quarter results.

The company had more than 3,100 employees at the end of 2020, according to its most recent annual report.