Starboard Value Acquires Nearly 5% of Clearwater Analytics and Urges Comprehensive Sale Process

Activist investment firm Starboard Value has disclosed an ownership stake of approximately 4.9% in Clearwater Analytics Holdings and is calling on the software provider to conduct a broad review of strategic alternatives, including a potential sale. The announcement, made on December 9, follows reports that Clearwater has received unsolicited interest from multiple buyers and has retained advisers to evaluate its options.

Clearwater Analytics, headquartered in Boise, Idaho, offers a cloud-native platform that unifies portfolio management, trading, investment accounting, reconciliation, regulatory reporting, performance measurement, compliance monitoring and risk analytics. Its single-instance, multi-tenant architecture serves insurers, asset managers, hedge funds, banks, corporations and government entities. At the close of the most recent trading session, the company carried a market capitalization of roughly $6.37 billion, or $21.76 per share.

Activist’s Position and Track Record

Starboard’s filing with the U.S. Securities and Exchange Commission confirmed the investment but did not specify an average purchase price. The New York-based activist is known for campaigns focused on operational efficiency and margin improvement, particularly within the information-technology sector. Historically, Starboard has launched 59 campaigns at technology companies, achieving an average return of 36.9% compared with 20.0% for the Russell 2000 over identical periods. Across all 163 prior activist positions, the firm’s average gain stands at 21.3% versus 14.3% for the same index.

Shift in Corporate Strategy

Clearwater debuted on the New York Stock Exchange in September 2021 at $18 per share, backed by private-equity sponsors Welsh, Carson, Anderson & Stowe (WCAS), Warburg Pincus and Permira. For several years the company maintained strong revenue growth, high margins and a net-cash balance, supporting a valuation premium relative to industry peers. That profile changed in early 2024 when Clearwater announced three acquisitions in quick succession: publicly traded Enfusion and privately held Beacon and Bistro. All three deals were unveiled between January and March and closed within months.

The transactions increased Clearwater’s leverage to roughly three times earnings before interest, taxes, depreciation and amortization. Investors questioned the abrupt move from an organic growth model to a more complex integration story. Following the third-quarter earnings release, shares fell to an intraday low of $15.73, significantly below earlier highs above $29.

Evolving Ownership Landscape

WCAS, which held a 56% stake at the time of the initial public offering, has reduced its position to about 1% as of November 2024. Warburg Pincus and Permira each exited their holdings of roughly 22% earlier this year. Despite selling down, Warburg and Permira continue to have board representation, raising questions about potential conflicts if either firm participates in a bid for the company.

Strategic Review and Potential Buyers

Market speculation intensified when Clearwater engaged financial advisers to review in-bound expressions of interest. Reported suitors include private-equity group Thoma Bravo as well as Warburg Pincus and Permira. Industry observers consider strategic acquirers such as BlackRock or Nasdaq possible contenders should a formal auction unfold.

Analysts estimate that leveraged-buyout economics could support a purchase price in the high $20-per-share range. A cash offer from a strategic buyer that seeks to integrate Clearwater’s technology into an existing platform might command a higher valuation, potentially exceeding $30.

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Starboard’s Objectives

Starboard has signaled it is open to multiple outcomes but is focused on ensuring that any transaction maximizes value for all shareholders. The firm supports two main scenarios: continued operation as an independent company executing its integration plan or a sale following a transparent, competitive process. It opposes any abbreviated deal led by current or former sponsors without a full market check.

If Clearwater chooses to remain independent, Starboard is expected to advocate for board reconfiguration, including the replacement of departing private-equity representatives with directors who possess industry expertise and direct shareholder alignment. Under that path, management would need to integrate the recent acquisitions, restore margin momentum and sustain organic growth in order to regain investor confidence.

Next Steps

Clearwater has not publicly detailed the timetable for its review but is widely expected to weigh initial indications of interest over the coming weeks. The company’s decision could set in motion one of three routes: (1) continuation as a stand-alone entity focused on integration and growth; (2) a sale produced by an open, competitive bid process; or (3) a transaction negotiated primarily by Warburg and Permira. Starboard is prepared to challenge the third option and to engage with other shareholders if necessary.

Until the board outlines its course, Clearwater’s share price is likely to be influenced by merger speculation, integration progress and activist activity. Investors will watch for disclosures of additional stakes, any resignation of private-equity-affiliated directors and formal outreach to strategic buyers. With a nearly 5% position, Starboard now holds a significant voice in those deliberations.

Crédito da imagem: NYSE