Firm: BlackLine Inc (BL)
Enterprise: BlackLine supplies monetary accounting options delivered primarily as Software program as a Service (SaaS). The corporate’s options allow its clients to handle numerous features of their important processes, together with monetary shut, intercompany accounting, invoice-to-cash, and consolidation. BlackLine’s cloud-based options embody account reconciliations, transaction matching, activity administration, journal entry, variance evaluation, consolidation integrity supervisor, compliance, BlackLine money utility, credit score and threat administration, collections administration, disputes and deductions, crew and activity administration, AR intelligence, intercompany create performance, intercompany processing, and netting and settlement. These options are supplied to clients as scalable options that help important record-to-report and invoice-to-cash processes.
Inventory Market Worth: ~$3.16B ($53.08 per share)
Activist: Engaged Capital
Possession: 2.02%
Common Price: n/a
Activist Commentary: Engaged Capital was based by Glenn Welling, a former principal and managing director at Relational Buyers. Engaged is an skilled and profitable small-cap investor and makes investments with a two-to-five-year funding horizon. Its model is holding administration and boards accountable behind closed doorways. Engaged has a median return of 20.56% versus 17.83% for the Russell 2000. Of the agency’s 39 previous activist campaigns, 9 of them have been at firms within the info know-how sector.
What’s taking place
On Oct. 30, 2025, Engaged despatched a letter calling on the BlackLine’s board to instantly have interaction monetary advisors and proactively run a strategic alternate options course of following renewed acquisition curiosity from SAP SE. Almost a month later, Engaged issued a so-called 220 Demand letter requesting entry to board and strategic committee data associated to all inbound acquisition curiosity, together with a reported $66 per share supply from SAP SE on June 18, 2025. Earlier this month, Engaged introduced that it plans to appoint the next 4 director candidates for election to BlackLine’s board on the 2026 Annual Assembly: (i) Christopher Hetrick, director of analysis at Engaged Capital; (ii) Christopher Younger, former head of contested conditions at Jefferies; (iii) Christopher Hallenbeck, former senior vice chairman at SAP SE; and (iv) Storm Duncan, founding father of technology-focused M&A advisory agency Ignatious.
Behind the scenes
BlackLine supplies monetary accounting options delivered primarily as Software program as a Service (SaaS). This can be a very prototypical enterprise software program enterprise, characterised by excessive gross margins (80%) and sticky choices which can be important for big enterprises. Its largest of those purchasers is SAP SE, with whom BlackLine has a strategic partnership that contributes roughly 30% of the corporate’s income. Traditionally, the enterprise was targeted on development, and rightfully so, because it was compounding income at over 20% yearly for a few years, and the inventory worth grew together with that success. By the tip of 2020 BlackLine was buying and selling round $133, and Marc Huffman, who led the corporate by the worldwide pandemic, was promoted from president to CEO, changing founder Therese Tucker who took on the position of govt chair of the board. Nevertheless, publish Covid, development started to decelerate, margins didn’t come up meaningfully to compensate, and the inventory fell accordingly, buying and selling as little as roughly $61 in December 2022.
BlackLine was rumored to have been thrown a life raft in 2022, when Clearlake Capital, a non-public fairness agency identified for taking positions in choose know-how firms as a prelude to an acquisition supply, took a roughly 9% public place in BlackLine. There was additionally hypothesis that this growth piqued the curiosity of SAP. This appeared like excellent timing: BlackLine’s hyper development had severely slowed and multiples within the area have been as excessive as ever. It’s arduous to know what sort of discussions go on in a boardroom, however an acquisition by no means occurred. In March 2023, Huffman was changed when Tucker returned to the corporate in a co-CEO construction with former Deloitte marketing consultant Owen Ryan (till October 2025 when he was made sole CEO). Since Tucker’s return, development has continued to say no to excessive single digits and whereas margins have improved modestly, the corporate’s inventory is down one other 24%. Regardless of all of this, historical past repeated itself when it was just lately reported that SAP made a proposal to accumulate BlackLine in June, this time for $66 per share, an over 30% premium to the 60-day buying and selling common on the time. On the time, the corporate’s development price was additionally a lot decrease than it was in 2022, and trade multiples have compressed considerably. BlackLine, regardless of creating no worth in public markets over the past a number of years, reportedly rejected the method.
This refusal is what prompted Engaged Capital to ship a letter calling on the BlackLine board to instantly have interaction monetary advisors and proactively run a strategic alternate options course of following renewed acquisition curiosity from SAP. Engaged will not be advocating for a sale of the corporate at any worth, nor does the board have a authorized obligation to interact each acquisition supply. However conscientious shareholders definitely have the appropriate to query how a board addresses a possible materials transaction, notably once they really feel the board will not be appearing in one of the best curiosity of shareholders. Activist traders like Engaged don’t view this without any consideration however an obligation. So, Engaged is asking the board to judge the SAP supply and weigh it in opposition to some other presents and on a risk-adjusted foundation in opposition to a standalone path. This request is cheap below virtually any circumstances, however much more so when the potential acquirer is the corporate’s most necessary enterprise relationship. Whereas SAP often is the most sensible associate, and sure the one in the end keen to pay the largest premium (estimated to be within the mid-70s). Given their current strategic partnership, BlackLine meets the profile of a really perfect match for personal fairness. With secure reoccurring income and modest development, the worth right here is all within the margins, and PE corporations have constantly demonstrated their means to construct software program companies with 20% EBITDA margins, like BlackLine, and develop them upwards of 40% as soon as non-public, comparable to Vista/Blackstone at Smartsheet and Francisco Companions/TPG at New Relic. Notably, Clearlake Capital continues to personal a 9.6% place in BlackLine. The agency has taken related positions in firms like Cornerstone OnDemand, which it acquired in 2021, and Blackbaud, which rejected Clearlake’s takeout supply in March 2023 after which once more in 2024.
Rather a lot has occurred since Engaged first offered this thesis final October. Shortly thereafter, BlackLine disclosed that it has maintained an impartial strategic committee of the board for greater than a yr, with members together with David Henshall, who’s serving as chairperson, Greg Hughes and Tom Unterman. Notably, Henshall has a historical past of getting firms bought as a director, together with New Relic when it was engaged by Engaged. Following this announcement, Engaged issued a 220 Demand letter to the corporate requesting entry to board and strategic committee data associated to all inbound acquisition curiosity, together with a reported $66 per share supply from SAP SE on June 18, 2025. Engaged expressed issues concerning the disclosures across the firm’s strategic committee, noting that BlackLine solely just lately revealed the committee’s existence and has nonetheless not disclosed key info round it, together with when it was shaped, its goal, the scope, its authority and whether or not it has retained advisors. Earlier this month, Engaged introduced that it plans to appoint the next 4 director candidates for election on the firm’s 2026 Annual Assembly: (i) Christopher Hetrick, director of analysis at Engaged Capital; (ii) Christopher Younger, former head of contested conditions at Jefferies; (iii) Christopher Hallenbeck, former SVP at SAP SE; and (iv) Storm Duncan, founding father of know-how -focused M&A advisory agency Ignatious.
When assessing Engaged’s probabilities of success in a proxy struggle, there are a number of dynamics to contemplate. First, in late December, Unterman introduced that he is not going to stand for re-election as a member of the board on the firm’s 2026 Annual Assembly. His impending departure creates each a board emptiness in a seat up for election in 2026, so at worst for Engaged, it is going to be working its slate of 4 in opposition to three incumbents and a brand new nominee. Second, Engaged will doubtless get the help of Clearlake (9.6%), one of many firm’s largest shareholders. Third, there are indicators of shareholder discontent, as CEO Ryan obtained over 20% withhold votes final time he was up for election. Lastly, and most important, one of many 4 administrators up for election is founder Therese Tucker. If she sees the smallest signal of being ousted from the corporate she based, it may result in a fast settlement or a sale of the corporate. BlackLine added two new administrators in June and July of 2025, which the corporate will undoubtedly argue is proof of fine company governance and board refreshment. Nevertheless, these administrators are within the class up for re-election in 2027, and good company governance would dictate that they’re voted on within the 2026 election so to not be on the board for 2 years with out shareholder approval. That is one thing we used to see extra of and definitely is not going to see amid a proxy struggle. Lastly, it is very important word that one of many administrators up for election this yr is Scott Davidson who was appointed to the board final yr as a part of the Scalar Gauge settlement. By concentrating on him, Engaged can’t essentially depend on Scalar Gauge’s help, however that agency solely owns a 1.15% stake.
Ken Squire is the founder and president of 13D Monitor, an institutional analysis service on shareholder activism, and the founder and portfolio supervisor of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist investments.
