Activist Engaged Capital is poised to shake up the board at BlackLine
Company: BlackLine Inc (BL)
Business: Black Line provides financial accounting solutions delivered primarily as Software as a Service (SaaS). The company’s solutions enable its clients to address various aspects of their critical processes, including financial close, intercompany accounting, invoice to cash, and consolidation. BlackLine’s cloud-based solutions include account reconciliations, transaction matching, task management, journal entry, variance analysis, consolidation integrity manager, compliance, BlackLine cash application, credit and risk management, collections management, disputes and interruptions, team and task management, AR intelligence, cross-company creation functionality, cross-company processing, and clearing and reconciliation. These solutions are offered to customers as scalable solutions that support critical record-to-report and invoice-to-cash processes.
Stock Market Value: ~$3.16B ($53.08 per share)
Activist: Engaged Capital
Ownership: 2.02%
Average Cost: no
Activist Comment: Engaged Capital was founded by Glenn Welling, former director and chief executive of Relational Investors. Engaged is an experienced and successful small-cap investor, making investments with an investment horizon of two to five years. His style is to hold management and boards accountable behind closed doors. Engaged’s average return was 20.56%, compared to 17.83% for the Russell 2000. Nine of the firm’s past 39 activist campaigns have been with companies in the information technology sector.
what’s going on
Engaged on October 30, 2025 sent a letter We call on BlackLine’s board to immediately engage financial advisors and proactively conduct a strategic alternatives process following renewed acquisition interest from SAP SE. About a month later, Engaged released a post. so-called 220 Request letter Requesting access to board and strategic committee records related to all incoming acquisitions, including the $66 per share offer from SAP SE reported on June 18, 2025. this monthEngaged announced that it plans to nominate the following four director candidates for election to BlackLine’s board of directors at its 2026 Annual Meeting: (i) Christopher Hetrick, director of research at Engaged Capital; (ii) Christopher Young, former head of litigation at Jefferies; (iii) Christopher Hallenbeck, former senior vice president of SAP SE; and (iv) Storm Duncan, founder of technology-focused mergers and acquisitions advisory firm Ignatious.
behind the scenes
BlackLine provides financial accounting solutions delivered primarily as Software as a Service (SaaS). This is a fairly prototypical enterprise software business, characterized by high gross margins (80%) and the sticky offerings required for large enterprises. The largest of these customers is SAP SE, with which BlackLine has a strategic partnership that contributes approximately 30% of the company’s revenue. Historically, business has been focused on growth, and rightly so; because it increased revenue by over 20% annually for many years and the stock price grew with this success. At the end of 2020, BlackLine was trading around $133, and Marc Huffman, who led the company through the global pandemic, said: was promoted He rose from president to CEO, replacing founder Therese Tucker, who served as executive chairman of the board. But post-Covid growth began to slow, margins did not increase meaningfully enough to offset this, and the stock fell accordingly, falling to around $61 in December 2022.
BlackLine was rumored to be Life raft launched in 2022That’s when Clearlake Capital, the private equity firm known for taking positions in select technology companies as a prelude to a buyout offer, took a nearly 9% public position in BlackLine. There was also speculation that this development attracted the attention of SAP. This seemed like perfect timing: BlackLine’s hypergrowth had slowed significantly, and multiples in the space were as high as ever. It is difficult to know what kind of discussions were going on in a meeting room, but a purchase never occurred. Inside March 2023Tucker replaces Huffman when he returns to the company with a co-CEO structure with former Deloitte consultant Owen Ryan (until he becomes sole CEO in October 2025). Since Tucker’s return, growth has continued to fall into the high single digits, and the company’s shares have fallen another 24% as margins have increased modestly. Despite all this, history repeated itself recently with the news that SAP made an offer to acquire BlackLine, this time in June. $66 per shareThis is a premium of over 30% to the 60-day trading average at the time. At that time, the company’s growth rate was also much lower than in 2022, and industry multiples had narrowed significantly. BlackLine has reportedly rejected this approach, even though it has created no value in the public markets over the past few years.
This rejection is what prompted Engaged Capital to send a letter to BlackLine’s board urging it to immediately engage financial advisors and proactively conduct a strategic alternatives process in the wake of renewed acquisition interest from SAP. Engaged is not advocating a sale of the company at any price, and the board has no legal duty to act on every acquisition offer. But conscientious shareholders certainly have the right to question how a board of directors is handling a potentially material transaction, especially if they believe the board is not acting in the best interest of shareholders. Activist investors like Engaged see this as an obligation, not a right. Engaged is therefore asking the board to evaluate the SAP proposal and compare it with other proposals and on an independent basis on a risk-adjusted basis. This request is reasonable in almost all circumstances, but is even more reasonable when the potential buyer is the company’s most significant business relationship. SAP may be the most logical partner and probably the one willing to pay the largest premium (estimated to be in the mid-70s). Given its existing strategic partnerships, BlackLine meets the ideal fit profile for private equity. With stable recurring revenue and modest growth, the value here is all in the margins, and PE firms have consistently demonstrated their ability to build software businesses with 20% EBITDA margins like BlackLine and expand them by as much as 40% when they go private. Vista/Blackstone in Smartsheet And Francisco Partners/TPG In New Relic. Notably, Clearlake Capital continues to hold a 9.6% position in BlackLine. The firm also held similar positions in companies such as Cornerstone OnDemand. Purchased in 2021and Blackbaud, Rejecting Clearlake’s takeout offer In March 2023 and thereafter again in 2024.
A lot has happened since Engaged first presented this thesis last October. After a short time, BlackLine explained said it has maintained an independent board strategic committee for more than a year, whose members include David Henshall, Greg Hughes and Tom Unterman, who serve as chairman. Henshall, in particular, has a track record of selling companies as an executive, including New Relic, for which he engaged Engaged. Following this announcement, Engaged issued a 220 Request letter to the company requesting access to board and strategic committee records related to all incoming buyout interests, including the reported $66 per share offer from SAP SE on June 18, 2025. Engaged expressed concerns about disclosures about the company’s strategic committee, noting that BlackLine only recently revealed the existence of the committee and still did not disclose important information about the committee, including when it was formed, its purpose, scope, and authority. and whether he retains advisors. Earlier this month, Engaged announced that it plans to nominate the following four director candidates for election at the company’s 2026 Annual Meeting: (i) Christopher Hetrick, director of research at Engaged Capital; (ii) Christopher Young, former head of litigation at Jefferies; (iii) Christopher Hallenbeck, former Senior Vice President of SAP SE; and (iv) Storm Duncan, founder of technology-focused mergers and acquisitions advisory firm Ignatious.
There are several dynamics to consider when assessing Engaged’s chances of success in the proxy war. First, in end of decemberUnterman announced that he will not seek re-election to the board of directors at the company’s 2026 Annual Meeting. His impending departure creates a vacancy on the board both for elections in 2026, so in a worst-case scenario for Engaged, he will continue his four-way lineup against three incumbents and a new candidate. Second, Engaged will likely have the backing of Clearlake (9.6%), one of the company’s largest shareholders. Third, there are signs of shareholder discontent, as CEO Ryan noted More than 20% withheld votes He was going to the last election. Finally, and most importantly, one of the four directors up for election is founder Therese Tucker. If he sees even the slightest sign that he will be ousted from the company he founded, this could lead to a quick deal or sale of the company. Black Line Two new directors added This situation in June and July 2025, which the company will undoubtedly discuss, is evidence of good corporate governance and board renewal. However, these directors are up for re-election in 2027, and good corporate governance requires that they be voted out in the 2026 election so that they do not sit on the board for two years without shareholder approval. This is something we’ve seen more of in the past and definitely won’t see in a proxy fight. Finally, it is worth noting that one of the directors up for election this year is Scott Davidson. Appointed to the board of directors last year As part of the Scalar Meter layout. By targeting it, Engaged cannot rely on Scalar Gauge’s support, although that firm only owns a 1.15% stake.
Ken Squire is the founder and president of 13D Monitor, a corporate research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, an investment fund that invests in a portfolio of activist investments.
