Another day, another delay in the Blackbaud/Convio saga. My Google Alert set-up just for this unfolding drama took me to the page Blackbaud has set-up to cover the intended Convio acquisition:
What is the latest update?
Regarding the offer for Convio shareholders to tender their shares, on March 21, 2012, Blackbaud announced that it has extended the expiration of its cash tender offer for all outstanding shares of common stock of Convio to midnight, New York City Time, on Wednesday, April 4, 2012. The expiration date of the tender offer may only be extended in increments of no more than ten business days each, pursuant to the terms of the merger agreement between the companies.
Regarding the ongoing DoJ process, Blackbaud will continue to respond to informal requests by the DoJ to provide additional information about its business, discuss the proposed transaction and answer any additional questions raised by the DoJ staff. Blackbaud remains committed to working cooperatively with the DoJ as it conducts its review of the proposed acquisition and to refiling its Hart-Scott-Rodino Notification and Report as soon as appropriate.
Looks like Marc was a little ambitious when he said the deal would close in Q1. Notice the phrase â€œinformal requests.â€ Thatâ€™s not a small thing. Blackbaud does not want the dreaded â€œsecond requestâ€ which involves a much deeper look at their current and past business practices including the ultimate fate of product lines from previous acquisitions. This observation from a recent Nonprofit Times article captures the tight rope Blackbaud is walking:
â€œIt looks like to me the issue isnâ€™t so much the tender offer as it is getting through the DoJ process,â€ said James Nixon III, a partner with Waller Lansden in Nashville, Tenn., who practices in the areas of mergers and acquisitions. â€œThe way it can work, you make the initial Hart-Scott filing with DoJ, they can request other information about the deal and companies on an informal basis. Youâ€™d rather keep on informal basis, try to get them comfortable with the deal. If you get a formal request, it requires a lot of document production, effort and money.â€
While none of the sides will comment, insiders say the DoJ is looking at potential issues of monopoly when the two largest industry players attend [sic] to merge.
That sure sounds like the DoJ is considering a second request.Â Since I was on the Blackbaud acquisition page with FAQs I decided to look around and found what is the most frequently asked question in the industry:
What will happen with the products?
We recognize the biggest question for customers concerns the potential product decisions. Along with customer and pricing information, product roadmaps are among the most sensitive pieces of information for competitors and cannot be decided, or even discussed, by the two companies prior to the two companies becoming one. Suffice it to say that Blackbaud has a track record of supporting and continuing to develop acquired products or providing migration support for conversion in cases where that is the best option.
The second request will ask a LOT of questions about how they â€œsupported,â€ â€œcontinued to develop,â€ and â€œprovided migration support for conversion.â€ Reading this has to make Convio clients a little nervous because a number of them are using both the online engagement platform and Common Ground built on Salesforce. The first competes directly with both Blackbaud Sphere and Blackbaud NetCommunity. The second competes with e-Tapestry, Raiserâ€™s Edge,Â eCRM, and Altru.Â I forgot to mention Convio also has Strategic One which overlaps with Target Analytics so the mention of â€œproduct roadmapsâ€ would be more well-defined as â€œThe Atlas of Blackbaud Products.â€
Oh and there is the TeamRaiser vs. Friends Asking Friends event fundraising face-off. That will bring some old Kintera/Convio friends back together in the map room.
So letâ€™s take a trip into the future (a distant future if the second request happens) and ponder what will happen once the deal is approved:
Step 1: Champagne will be poured. Iâ€™m guessing French given Chardonâ€™s heritage.
Step 2: Â Roll call will commence to determine who is still in the room. Sadly Vinay, Founder of Convio, will not be there having taken his â€œthanks for your ideas, we donâ€™t need those anymoreâ€ money. Given how many people have already left Convio since the announcement of the deal (and interestingly just prior) Iâ€™m not sure who, other than the four Convio Execs that received employment contracts, will be there.
Step 3: Chardon will announce the plan. Wait you might say â€“ this is when the roadmap meeting begins and everyone gets a chance to advocate for their product line – advocate for your product line you hope, right? Sorry, Chardon did not invest over $300 million not knowing exactly what he was going to do with Convio. If he did, he should be fired. Itâ€™s true he was the CFO, not the CTO, of MS-Office, but I still think he is enough of a techie to have figured out what he wants to keep and what he wants to â€œmigrate.â€
Step 4: An announcement goes out to clients, and everyone else who might be thinking of being a client, that talks about the amazing products that will come after careful study by the brain trust in Charleston. It will be carefully worded to keep clients hoping their product of choice will win (or at least survive through their current contract). Such wording will include as many vague, ambiguous, and veiled words and phrases as possible. Knowing the marketing team at Blackbaud, itâ€™s already been written. This might actually be more of a cut and paste exercise, given the number of previous acquisitions.
Step 5: Steps 1-4 took about 48 hours. You donâ€™t get to the fifth for at least 9-12 months. That is when an announcement comes that a couple of the most obvious choices have been made. Strategic One has been successfully integrated with Target Analytics is a layup, and something about how the TeamRaiser/Sphere/NetCommunity teams are all working together with a common goal to ensure the most money is raised (if you believe that, then you havenâ€™t met engineers who love their products and salespeople who donâ€™t like their competitors). There will be talk of integrations between the products. This was done very quickly with Team Approach and Sphere so I think they are already hard at work figuring out TeamRaiserâ€™s connection to eCRM. You will have to ask clients how that integration worked out – based on other “integrations” I’m guessing not too well.
Step 6: This will be dragged out as long as clients allow. This is when they start telling you whether or not you will have to migrate to another Blackbaud product. The bigger you are (read revenue to Blackbaud) the more likely it is your hand will be held and your tears dried by a Blackbaud Care Representative. For others it will be â€œhereâ€™s the date your current product turns into a pumpkin.â€
This product roadmap game is not unlike the game where you have to guess which cup has the ball under it except in this case itâ€™s not a ball, itâ€™s that product you depend on to do your work.
What makes all of this a very dangerous game for nonprofits is that itâ€™s not like there is a golden product to be unveiled. Post-acquisition they will have the following platforms:
- Infinity (.Net behemoth, takes years to implement and cost a whole lot of money â€“ just ask the folks at The University of Michigan or the other early adopters who received an â€œearly adopter creditâ€)
- Raiserâ€™s Edge (you have to carbon date the technology in this one, but you can get it hosted and enjoy your Citrix connection plus you get to add (i) to Raiserâ€™s Edge)
- E-Tapestry (private cloud Software-as-a-Service designed for small shops)
- Convio Online (private cloud Software-as-a-Service)
- Common Ground (Built on Salesforce.com)
- Blackbaud Sphere (private cloud Software-as-a-Service)
- Blackbaud NOW (private cloud Software-as-a-Service targeting very small shops)
So what gets killed, oops, I mean, migrated? Raiserâ€™s Edge needs to be thrown over the edge, so replace it with Common Ground? Sounds good, but then Blackbaud is left with the Salesforce open cloud problem where competitive applications will have access to their clients so that doesnâ€™t work. Blackbaud Sphere and Convio Online are completely redundant, but Blackbaud will have paid $300 million for Convio and only $40 million for Sphere so thatâ€™s easy – bye-bye Sphere (maybe keep the trademark for Friends-Asking-Friends though). E-Tapestry is the logical place to send the smaller Common Ground clients so say goodbye to Salesforce and hello to the private cloud where you hope the Best of Your Vendor is good enough. The top Common Ground (or Luminate as the top-end product is now known) clients will be sent to Infinity. Raiserâ€™s Edge will be reborn as a SaaS offering, but who knows when that will happen. Finally, Blackbaud NOW will stay around to catch whatever it can at the bottom of the market.
For Convio this time has to be especially painful and some of that pain was revealed in their recent 10-K Annual Report:
The announcement and pendency of the Merger may have a negative impact on our business, financial results and operations or disrupt our business by:
- affecting our relationships with our customers, distributors, suppliers and employees;
- Â intensifying competition as our competitors may seek opportunities related to our pending Merger;
- affecting the purchasing decisions of existing and prospective customers, which could cause them to delay purchasing decisions or to seek alternative suppliers, resulting in a reduction in sales and increased churn;
- limiting certain of our business operations prior to completion of the Merger which may prevent us from pursuing certain opportunities without Blackbaud’s approval;
- impairing our ability to attract, recruit, retain, and motivate current and prospective employees who may be uncertain about their future roles and relationships with Blackbaud following the completion of the Merger; and
- causing us to forego certain opportunities we might otherwise pursue absent the Merger Agreement
- creating distractions from our strategy and day-to-day operations for our employees and management and a strain on resources
You have to wonder how much of this pain has already happened. It will be interesting to see their Q1 results and I wonder if Blackbaud will be giving more refunds? We can leave that for Part 3.
This all can make your head (and potentially wallet) Â hurt, but donâ€™t fear – Chardon and team already know what they are going to do. They are just not going to tell you until they have to.