Company: BlackLine Inc (BL)
Business: BlackLine provides financial accounting solutions primarily delivered as Software as a Service (SaaS). The company’s solutions enable its customers 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 reconciliation, task management, journal entry, variance analysis, consolidation integrity manager, compliance, BlackLine cash application, credit and risk management, collections management, disputes and deductions, team and task management, AR intelligence, intercompany creation functionality, intercompany processing, and netting and settlement. These solutions are offered to customers as scalable solutions that support critical record-to-report and invoice-to-cash processes.
Market value: ~$3.16 billion ($53.08 per share)
Activist: Engaged Capital
Property: 2.02%
Average cost: n/a
Comment from activists: Engaged Capital was founded by Glenn Welling, a former director and managing director of Relational Investors. Engaged is an experienced and successful small cap investor and makes investments with an investment horizon of two to five years. His style is to hold management and boards accountable behind closed doors. Engaged has an average return of 20.56%, compared to 17.83% for the Russell 2000. Of the firm’s 39 past activist campaigns, nine have taken place at companies in the information technology sector.
What happens
On October 30, 2025, Engaged sent a letter requesting that BlackLine’s board immediately engage financial advisors and proactively undertake a strategic alternatives process following renewed acquisition interest from SAP SE. Nearly a month later, Engaged issued a so-called 220-demand letter requesting access to board and strategic committee records related to all incoming takeover interest, including a reported offer from SAP SE of $66 per share dated June 18, 2025. Earlier this month, Engaged announced that it plans to approve the following four director candidates for election to BlackLine’s board of directors at its 2026 annual meeting nominate: (i) Christopher Hetrick, Research Director at Engaged Capital; (ii) Christopher Young, former Head of Controversial Situations at Jefferies; (iii) Christopher Hallenbeck, former Senior Vice President of SAP SE; and (iv) Storm Duncan, founder of technology-focused M&A advisory firm Ignatious.
Behind the scenes
BlackLine offers financial accounting solutions primarily delivered as Software as a Service (SaaS). This is a very prototypical enterprise software company, characterized by high gross margins (80%) and catchy offerings that are essential for large companies. The largest of these customers is SAP SE, with which BlackLine has a strategic partnership that accounts for approximately 30% of the company’s sales. Historically, the company has been focused on growth, and rightly so, as it has achieved annual sales of over 20% for many years and the share price has grown with this success. At the end of 2020, BlackLine was trading at around $133, and Marc Huffman, who led the company through the global pandemic, was promoted from president to CEO, replacing founder Therese Tucker, who took on the role of executive chairman. However, after the Corona crisis, growth began to slow, margins did not increase significantly to compensate for this, and the stock fell accordingly, trading at only about $61 in December 2022.
BlackLine was rumored to have been thrown onto a life raft in 2022 when Clearlake Capital, a private equity firm known for taking positions in select technology companies ahead of a tender offer, took a roughly 9% public stake in BlackLine. There was also speculation that this development had piqued SAP’s interest. This seemed like perfect timing: BlackLine’s hyper-growth had slowed significantly and multiples in the space were as high as ever. It’s hard to say what kind of discussions take place in a boardroom, but a takeover never happened. In March 2023, Huffman was replaced when Tucker returned to the company in a co-CEO structure with former Deloitte consultant Owen Ryan (until he was named sole CEO in October 2025). Since Tucker’s return, growth has fallen further to high single digits, and while margins have improved slightly, the company’s stock has fallen another 24%. Despite all this, history repeated itself when it was recently reported that SAP made an offer to acquire BlackLine in June, this time for $66 per share, a premium of over 30% to its 60-day trading average at the time. The company’s growth rate at that time was also significantly lower than in 2022, and the industry indicators have fallen significantly. BlackLine reportedly rejected the approach even though it had failed to add value to the public markets in recent years.
This refusal prompted Engaged Capital to send a letter to the BlackLine board requesting that the BlackLine board immediately engage financial advisors and proactively conduct a strategic alternatives process following SAP’s renewed interest in acquiring it. Engaged does not advocate a sale of the company at any price, nor is the board of directors legally obligated to accept any takeover offer. However, conscientious shareholders certainly have the right to question how a board approaches a potentially material transaction, particularly if they believe the board is not acting in the best interests of shareholders. Activist investors like Engaged see this not as a right, but as an obligation. Therefore, Engaged is asking the board to evaluate the SAP offer and weigh it against all other offers and, on a risk-adjusted basis, against an independent path. This request makes sense in almost all cases, but even more so when the potential acquirer is the company’s most important business relationship. SAP is probably the most logical partner and probably the one that is ultimately willing to pay the highest premium (estimated in the mid-70s). Due to the existing strategic partnership, BlackLine meets the profile of an ideal complement for private equity. With stable recurring revenue and modest growth, the value here is all in margins, and PE firms have consistently demonstrated their ability to build software companies with 20% EBITDA margins, like BlackLine, and grow them to over 40% after going private, like Vista/Blackstone at Smartsheet and Francisco Partners/TPG at New Relic. Notably, Clearlake Capital continues to hold a 9.6% stake in BlackLine. The company has taken similar positions at companies like Cornerstone OnDemand, which it acquired in 2021, and Blackbaud, which rejected Clearlake’s takeover offer in March 2023 and again in 2024.
A lot has happened since Engaged first presented this thesis last October. Shortly thereafter, BlackLine announced that it had maintained an independent strategic board committee for more than a year, whose members included David Henshall, who serves as chairman, Greg Hughes and Tom Unterman. Notably, Henshall has a history of leading companies to sell as a director, including New Relic when it was hired by Engaged. Following this announcement, Engaged sent a 220 demand letter to the company requesting access to board and strategic committee records related to all incoming takeover interest, including a reported offer from SAP SE of $66 per share dated June 18, 2025. Engaged expressed concerns about the disclosures surrounding the company’s strategic committee, noting that BlackLine only recently disclosed the existence of the committee and is yet to disclose has always failed to disclose important information about it, including the timing of its creation, its purpose, scope, powers and whether it retained 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 of shareholders: (i) Christopher Hetrick, Director of Research at Engaged Capital; (ii) Christopher Young, former Head of Controversial Situations at Jefferies; (iii) Christopher Hallenbeck, former SVP of SAP SE; and (iv) Storm Duncan, founder of technology-focused M&A advisory firm Ignatious.
There are several dynamics to consider when assessing Engaged’s chances of success in a proxy fight. First, Unterman announced in late December that he would not seek re-election as a board member at the company’s 2026 annual meeting. His impending departure creates both a vacancy on the board and a seat up for election in 2026, meaning that in a worst-case scenario, Engaged will face four candidates against three incumbents and one new candidate. Second, Engaged is likely to get the support of Clearlake (9.6%), one of the company’s largest shareholders. Third, there are signs of dissatisfaction among shareholders as CEO Ryan withheld over 20% of the vote the last time he ran. Finally, and most importantly, founder Therese Tucker is one of the four directors up for election. If she sees even the slightest signs that she is being pushed out of the company she founded, it could lead to a quick settlement or sale of the company. BlackLine has appointed two new directors in June and July 2025, which the company will no doubt say is evidence of good governance and board renewal. However, these directors are up for re-election in 2027 and good corporate governance would require that they be elected in the 2026 election, so they would not be allowed to serve on the board for two years without shareholder approval. This is something we’ve seen more of before and certainly won’t see again in a proxy fight. Finally, it is important to note that one of the directors up for election this year is Scott Davidson, who was appointed to the board last year as part of the Scalar-Gauge agreement. By targeting him, Engaged cannot necessarily rely on the support of Scalar Gauge, but that company only owns a 1.15% stake.
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist assets.