Business: EnvestnetProvides wealth management software and services to investors. This product has a high retention rate of 90% and secular tailwinds. Envestnet, founded by Jud Bergman & Bill Crager in 1999. From 1999 to October 2019, Bergman served as chairman and CEO. He was then tragically killed in an automobile accident. Bill Crager was appointed interim CEO, and became the permanent CEO in March 2020.

Stock Market ValuePrice: $4.5B (81.68 per Share)

Commentary by an Activist:Impactive Capital was founded by Lauren Taylor Wolfe, Christian Alejandro Asmar and is an activist hedge-fund. Impactive Capital (ESG) is active.AESG™The AESG(tm) investors started with $250 million from CalSTRS. Now they have over $2 billion. In just three years, they have made quite a name for themselves as AESG™ investors. Wolfe and Asmar saw a way to increase returns by using tools on both the environmental and social side. Impactive’s focus is on systemic positive change in order to build sustainable and competitive long-term businesses. The traditional tools of financial, strategic, operational and managerial change used by activists will be utilized by Impactive. However, ESG change will be implemented if it is important to the company, drives shareholder value, and increases profitability.

Since the beginning, Impactive was a shareholder. second quarter of 2021When the company began to invest in growth it sacrificed short-term profits. This scared off investors short term and created a buying opportunity that Impactive funds could buy. It spent nearly $50 million more on 2021 new employees for projects that are in the future than it originally indicated.

Three opportunities exist here. First, the company’s growth plan could start to take shape and produce structurally stronger growth. Crager said “2022” was a year of execution, so it is important to know if Crager’s growth strategy is effective.

If the growth is not realized, it’s possible to reduce costs and increase operating margins. This company should abide by the rule of 40 for software companies – its growth rate plus its operating margins should equal or exceed 40. The revenue grew 19% in last year but the operating margins were low at single digits. If the growth rate is not increasing or decreasing, then the company should stop investing heavily in growth. It can instead focus on efficiency to increase operating margins.

The third is the strategic chance to create value. Envestnet is rumored to have considered spinning off Yodlee, its Yodlee company (which could potentially be worth more than $1 billion). sell the entire company. In reality, February 2022 it was reportedEnvestnet hired a banker in order to look into a possible sale in an auction that was geared towards private equity firms. This week: it was reportedAdvent International and Warburg Pincus were the last bidders.

ESG is a thesis that Impactive uses to invest and seeks out opportunities where these improvements could drive value. ESG value and economic creation can be completely aligned in this case. Envestnet is focusing on ESG as an investment strategy and has designed impact products such as the Impact Overlay to help advisors invest responsibly. Envestnet will be able to offer more value, generate more revenue and help their clients build their wealth. ESG is a new area of interest for Envestnet, which has historically not been focused on ESG, and had some negative ESG characteristics (staggered boards, no sustainability reports, lawsuit concerning collecting customers’ personal data without their knowledge). This makes it more economical than conscionious. We expect Envestnet, with Impactive as a partner to rectify these ESG deficiencies in the future.

Ken Squire, the president and founder of 13D Monitor is an institution research service that focuses on shareholder activism. He also founded and managed the portfolio for the 13D Activist Fund which invests in a range of activist 13D investments.