M&A Alert - March 11, 2010
Blackboard Acquires Mobile Messaging Company Saf-T-Net
Transaction OverviewBlackboard, Inc. (Nasdaq: BBBB) announced on March 8th, 2010 that it has entered into a definitive agreement to acquire privately-held Saf-T-Net, Inc., provider of the mass mobile messaging/notification service AlertNow aimed at the K-12 market, for approximately $33mm in cash.
Target DescriptionSaf-T-Net, Inc. specializes in rapid mobile message-based communication and alert systems aimed at the K-12 community. Designed to address the demands upon school administrators to ensure safety, improve attendance, and engage with parents and the broader community more effectively, Saf-T-Net’s AlertNow service provides rapid voice, email or SMS notification (up to 2.5mm messages/hour) for situations such as emergencies or weather-related closings. To date, Saf-T-Net has partnered with over 2,000 schools that use its products and services. Saf-T-Net was founded in 1996 by Howard Udell and Robert Bruce as a data backup company and is based in Raleigh, North Carolina.
Buyer DescriptionBlackboard, Inc. is a maker of educational software for scholastic institutions. Blackboard’s core products are innovative enterprise technologies, which provide solutions to the needs of school administrators. Blackboard has emerged as a leader in the Learning Management System market, using technological platforms to deliver its content, commerce and notification services. Its new Mobile Central service helps institutions bring all of the information a student might need such as maps, directories, course catalogs and the like, to a central, cloud-based application accessed through mobile devices. Blackboard provides related educational enterprise services to over 5,000 k-12, higher-ed, government, corporate, and related institutions. In July of 2009, Blackboard acquired TerriblyClever Design, an educational and enterprise
Blackboard, Inc. has paid $33mm in cash (roughly 3x TTM revenues) for Saf-T-Net, Inc., excluding closing costs. Michael Stanton, Blackboard's senior vice president of finance, has said that Saf-T-Net generated $9.8 million in revenue in 2009. However for 2010 under GAAP, Saf-T-Net will contribute $5.5 million to Blackboard's 2010 revenues, given the assumed closing date of late March. Blackboard expects the purchase will dilute earnings per share this year, and provide a positive effect in 2011.
Strategic RationaleThis acquisition does three main things for Blackboard: it gets a broader offering in notification services, it provides another entry point to the K-12 market, and it moves the company further into the mobile device world. Blackboard has a competing notification service in Blackboard Connect, which the company announce in February served 1 in 6 U.S. college students. Saf-T-Net's AlertNow technology and team will now become part of Blackboard’s Connect division. This will enhance Blackboard Connect with new features such as the Parent Portal technology, enhanced survey capabilities, and the ability to translate messages into multiple languages. Saf-T-Net has been primarily focused on the K-12 market, while Blackboard is strongest in higher ed - this acquisition helps leverage Blackboard into the K-12 segment. And finally, consistent with Blackboard's acquisition of TerriblyCleverDesign (iPhone app developer) and the launch of Blackboard's Blackberry app last year, this move underscores the company's interest in extending its market leadership into the mobile sector.
Architect Partners’ ObservationsThere is little surprising about this deal, except the curious announcement trumpeting Blackboard's competing Connect service just one month prior. This transaction eliminates a competitor, helps Blackboard move more into the K-12 segment and supports the company's mobile strategy. The purchase price seems reasonable given Saf-T-Net's growth and potential operating synergies. This is another example of a market leader using strategic acquisitions to broaden a set of service offerings and strengthen its position in a consolidating industry.