We Share and We Gather started as a closed social network for churches. It quickly morphed into an online donation tool for nonprofits. The donation portal had just 10 customers process donations in its first year. The second year it had 200. Over the course of 10 years, there were 2,300 nonprofits using Liturgical Publications Inc.’s (LPi) software, managing more than a third of a billion dollars annually.
It was then that Joe Luedtke, CEO, LPi, decided it was time to carve out the Software as a Service (SaaS) tool. The exact sale price is confidential, but it was a high, eight-figure deal. Milwaukee doesn’t see a lot of tech M&A activity, Luedtke says, which is why he’s reasonably confident it may be the second-largest software/information tech deal in the Milwaukee area last year, with the 7Summits/IBM deal being the largest.
Luedtke and his team knew what they had was valuable, they just weren’t exactly sure how valuable. After going through the process of hiring an investment banker, within three months they had their initial sell-sheet memorandum. What surprised them about the process was the variation in valuations from the investment banker pool — $50 million from low end to high end.
“There was a wide variety of donation tools already in the marketplace, but we had very specific niches,” Luedtke says. “We were focused on customers that were primarily churches and also another customer set that was primarily senior centers or adult activity centers and those markets were underserved in the general online donation space.”
Luedtke didn’t go with the banker with the highest valuation. They wanted an investment banker that wasn’t too big, had fintech experience, and would be a good fit for his team.
After spending three months selecting the banker, it took less than three months to have their initial sell sheet confidential information memorandum out in the marketplace. They managed to complete what Luedtke says was two years of work in a six-month period.
“I thought I was prepared for the workload; I was unprepared for the workload,” Luedtke says. “It was a tremendous amount of effort. Work’s fun. It’s exciting. You hear about people who work all night, who work weekends, pull an all-nighter — it’s just a requirement at some points in the process. Eleven p.m. calls with the investment banker, followed up by midnight calls with your M&A attorney. It didn’t happen a lot, but it happened.”
A large chunk of that work was figuring out what intellectual property went into the business.
“We’re historically an advertising on print company, but now we’re selling a piece of software,” Luedtke says. “Intellectual property became a huge issue, but it's not in our typical ads-on-print world. So, making sure that everybody who worked on the software had signed a release releasing any of their work, whether they were an employee, an individual, or an independent contractor, or a consultant with a consulting firm. We were digging through code repositories to validate who all had worked on the software over 10 years. If you're a software company listening to this, you're thinking, ‘Well, duh! Of course, you should do that.’ We didn't know that.”
Although that IP process was difficult and time consuming, one area of the LPi carveout proved very valuable. It was their experience with the Catholic church.
“One of the key aspects of the valuation was our niche,” Luedtke says. “We were the largest online donation provider in the faith-based market, but very specifically in Catholic churches. There were other companies that focused on faith-based donation systems but didn’t have a lot of penetration in the Catholic market. Religions are very different and the ability to speak Catholic became a much more valuable commodity.”
To complete the deal, a carve-out team that would go with the sale had to be created. Luedtke says the investment banker emphasized that it was vital that the team remain intact throughout the sale process. In order to get buy-in from all the parties involved, the owners decided they would give up 10 percent of the net proceeds to be doled out over a period of time as long as they remained part of the team and helped with the sale.
