What happened
Shares of Blackbaud (BLKB -0.42%) were moving higher Tuesday after private equity firm Clearlake Capital disclosed on Monday night that it had taken an 18.4% stake in the education tech company.
As of 1:53 p.m. ET, Tuesday, Blackbaud's stock price was up by 17.3%.
So what
Clearlake's intentions are not clear, but in a 13-D filing with the Securities and Exchange Commission, the activist firm said that it may engage in discussions with Blackbaud's management team, board of directors, or shareholders.
In a research note published Tuesday morning, Don Bilson, head of event-driven research at Gordon Haskett, theorized that Clearlake could be following a similar playbook to the one it used with Cornerstone OnDemand, another education technology company. Clearlake first took an activist stake in Cornerstone, then acquired it last year. The prospect of such an acquisition seems to be one of the factors lifting Blackbaud shares Tuesday.
Now what
Blackbaud has not responded to the news. Its stock is down more than 50% from its 2018 peak, and its revenue growth seems to be recovering from the lull it experienced during the first years of the pandemic.
Revenue growth clocked in at 15% in the second quarter, though that seemed to have been primarily driven by acquisitions, as its organic recurring revenue was up just 5.1%. Still, Blackbaud is highly profitable, which helps explain why it would be attractive to a private equity firm like Clearlake.
In Q2, the company posted an adjusted operating margin of 20.6%, and its free cash flow margin was strong as well, at 16.6%.
Keep an eye on the next move by Clearlake, as we're likely to hear the activist investor's plans for unlocking value from Blackbaud in the coming weeks.
