BlackLine's Billion-Dollar Question: Activist Challenges Board on SAP Bid

NEWPORT BEACH, CA – November 24, 2025 – The boardroom battle lines have been drawn at BlackLine, Inc. (NASDAQ: BL), a leading provider of financial software. Activist investment firm Engaged Capital has escalated its campaign against the company’s leadership, deploying a powerful legal tool to demand answers about a potentially transformative, yet allegedly rejected, acquisition offer from software giant SAP SE.

On November 21, Engaged Capital, which holds over 1.2 million shares in BlackLine, submitted a formal Section 220 demand under Delaware law. This legal maneuver compels a company to open its books and records for inspection by a shareholder with a “proper purpose.” Engaged Capital’s stated purpose is to investigate the board’s handling of multiple buyout offers and to evaluate whether to nominate its own directors at the company’s 2026 annual meeting. The move signals a dramatic loss of patience from a significant shareholder and sets the stage for a potential proxy war that could reshape BlackLine’s board and strategic direction.

At the heart of the dispute is a bombshell allegation: that BlackLine’s board flatly rejected a formal, non-public offer from SAP on June 18, 2025, to acquire the company for $66 per share. This offer, valued at nearly $4.5 billion, would have represented an 18% premium to BlackLine's stock price at the time and a substantial premium over its current trading price, which hovered around $56 last week. For shareholders who have watched the stock underperform its software peers, the question of why the board would walk away from such a deal without a clear explanation has become a critical point of contention.

A Pattern of Underperformance and Secrecy

Engaged Capital’s public letter paints a picture of a board that is both unresponsive to shareholders and potentially dismissive of opportunities to maximize their value. The firm, led by Founder and CIO Glenn W. Welling, cited BlackLine’s “sustained and dramatic underperformance compared to relevant software indices” as a key driver for its actions. Indeed, BlackLine’s stock has declined over 8% in the past year, a stark contrast to the broader US Software industry’s growth. While long-term investors since its 2016 IPO have seen gains, the stock remains far below its all-time high of over $150 reached in early 2021.

Compounding the performance concerns is a perceived wall of silence from the company. Engaged Capital claims that “meaningful engagement with the Company has proven extremely challenging,” a sentiment it says is shared by other stockholders. This frustration boiled over with the company’s terse November 10th disclosure about its “Strategic Committee.” The filing confirmed the committee’s existence for “more than a year” and named its members—David Henshall (Chairperson), Greg Hughes, and Tom Unterman—but provided no details on its mandate, its authority, or whether it had retained independent financial advisors.

This lack of transparency is at the core of the activist’s demand. “The lack of information provided by the Company makes it impossible to determine whether Board members have adequately carried out their fiduciary duties,” Welling stated in his letter. The plot thickened when conflicting timelines emerged, with Chairman and CEO Owen Ryan reportedly commenting that the committee was first formed “about four years ago,” aligning with market chatter about a previous, undisclosed SAP offer from several years prior. For investors, this raises serious questions about what strategic opportunities have been considered—and rejected—behind closed doors.

A Company at a Crossroads

While Engaged Capital focuses on unrealized shareholder value, BlackLine’s leadership can point to a solid operational foundation and a clear growth strategy. The company is a recognized leader in the burgeoning Financial Close Management (FCM) market, a sector projected to grow from $5.6 billion in 2024 to nearly $15 billion by 2033. With over 4,400 customers, including a majority of the Fortune 500, BlackLine has a strong foothold in a largely underpenetrated $45 billion addressable market.

Recent financial results present a mixed, but not entirely negative, picture. The company reported a 7.5% year-over-year revenue increase in its third quarter of 2025, reaching $178.3 million and beating analyst estimates. It also generated a robust $57 million in free cash flow. Furthermore, BlackLine is not standing still, actively rolling out AI-powered features and a new platform to maintain its competitive edge. Some analysts remain bullish, with Morgan Stanley raising its price target to $73 in early November, citing the company’s strategic position.

However, there are undeniable signs of turbulence. GAAP net income fell sharply in the third quarter, and Baird recently downgraded the stock to “Neutral,” citing concerns over customer churn and profitability following the introduction of a new pricing model. The company also trimmed its full-year earnings per share guidance. This combination of slowing growth, margin pressure, and execution stumbles gives credence to Engaged Capital’s argument that the board’s standalone plan may not be the most compelling path forward for investors.

The Proxy Fight Looms

The Section 220 demand is far more than a simple request for information; it is a clear-cut strategic move in the activist investor playbook. By seeking board minutes, presentations from advisors, and all communications related to the SAP offer and the Strategic Committee, Engaged Capital is gathering ammunition for a proxy contest. The firm has been explicit in its purpose: “to evaluate whether it should run a slate of Class I director candidates at the 2026 Annual Meeting.”

Notably, two of the three members of the secretive Strategic Committee, David Henshall and Tom Unterman, are Class I directors whose terms expire at that very meeting. This sets up a direct confrontation where Engaged Capital could seek to replace the very individuals it holds responsible for the alleged strategic missteps. Delaware courts have consistently upheld that investigating mismanagement and preparing for a proxy fight are “proper purposes” for a Section 220 demand, giving Engaged Capital a strong legal footing.

BlackLine’s board is now in a difficult position. It can fight the demand in court, a process that is often costly, distracting, and publicly damaging. Alternatively, it can provide the requested documents under a confidentiality agreement, potentially revealing information that could bolster the activist’s case. A third option is to seek a settlement, which could involve board seats or a new, more transparent strategic review. Whatever path it chooses, the pressure is now immense. Shareholders will be watching closely to see if the board can justify its past decisions and articulate a vision for the future that is more compelling than a $4.5 billion check from SAP.