Starboard Value Takes ~5% Stake in Clearwater as Company Weighs Strategic Alternatives - Article

Company: Clearwater Analytics Holdings (CWAN)

Activist: Starboard Value
Ownership: ~4.9%

Starboard Value has disclosed a nearly 5% stake in Clearwater Analytics Holdings and is pressing the company to conduct a full and competitive review of strategic options if it has received inbound acquisition interest.

Clearwater is a leading provider of cloud-native, front-to-back investment accounting and analytics software for institutional investors. Its single-instance, multi-tenant platform integrates portfolio management, trading, accounting, reconciliation, regulatory reporting, performance, compliance, and risk analytics across public and private markets. The company serves insurers, asset managers, hedge funds, banks, corporations, and governments, and is widely viewed as a premium, modern alternative to legacy platforms offered by firms such as BlackRock, State Street and SS&C.

Starboard brings significant credibility to the situation. The firm has launched 163 activist campaigns historically, including 59 in information technology, generating average returns well in excess of the Russell 2000. Its reputation is built on deep diligence, operational rigor, and a focus on margin improvement and long-term value creation.

Background and Recent Developments

Clearwater went public in 2021 at $18 per share, backed by private equity sponsors Welsh, Carson, Anderson & Stowe (WCAS), Warburg Pincus and Permira. The company performed well through 2024, supported by consistent growth, strong margins and a premium valuation. Over time, Warburg and Permira fully exited their 22% stakes, while WCAS reduced its ownership from 56% to roughly 1% by November 2024, selling shares at prices as high as $29.11.

Shortly thereafter, Clearwater pivoted sharply from its historically clean, high-margin organic growth profile by announcing a series of acquisitions: Enfusion (a public company), along with private businesses Beacon and Bistro. These transactions, announced between January and March and closed soon after, transformed Clearwater into a more complex integration story with leverage of roughly 3x EBITDA.

The market reacted negatively, questioning both the strategic shift and management’s ability to integrate three acquisitions while sustaining core growth. Following its third-quarter earnings report, the stock fell to a low of $15.73.

Subsequently, reports emerged that Clearwater had engaged advisers to evaluate strategic alternatives after receiving unsolicited interest from potential buyers, including Thoma Bravo and even Warburg Pincus and Permira, both of which still had board representation.

Starboard’s Role and Thesis

Against this backdrop, Starboard disclosed its stake and urged Clearwater to run a robust and credible sales process if it is considering a transaction. This move should not be interpreted as opportunistic or short-term. Starboard has likely been evaluating Clearwater for many months and appears to believe in the company’s long-term standalone value.

However, once news surfaced that the company might be exploring a sale and that certain board members could be conflicted bidders, Starboard did what experienced activists do: ensure that any process is fair, competitive and designed to maximize value for all shareholders.

A legitimate review could attract additional bidders, including strategic acquirers such as BlackRock or Nasdaq. While leveraged buyout economics may support valuations in the high $20s per share, strategic buyers could potentially justify prices beginning with a 3 handle.

Starboard will ultimately weigh whether a sale price exceeds the risk-adjusted value of a standalone plan that integrates recent acquisitions and continues to grow the core business. Importantly, the firm appears comfortable with either outcome, as long as the process is sound.

What Comes Next

If Clearwater pursues a standalone strategy, it would be logical for former private equity sponsors, who no longer hold meaningful equity stakes, to step down from the board and be replaced by independent industry experts and shareholder representatives to help guide execution.

At this inflection point, Clearwater faces three realistic paths forward:

1. Standalone execution, integrating recent acquisitions and reigniting organic growth
2. A full and competitive sale process, resulting in an attractive premium for shareholders
3. A truncated or conflicted sale process, potentially favoring former sponsors

Starboard would likely support the first two outcomes and is expected to vigorously oppose the third. This balance, downside protection through activism combined with upside from either operational improvement or a value-maximizing sale, is what makes Clearwater a compelling activist situation for Starboard Value.