Advent International and Forescout Technologies are set to meet in court in mid-July for what looks to be the first MAE case litigated in light of covid-19.
Forescout, a publicly-traded cyber-security company, filed a complaint on May 20 with the Delaware Court of Chancery asserting that affiliates of Advent have violated the terms of their merger agreement with Forescout, the company announced Wednesday.
On May 28, ahead of the transaction’s June 6 termination date, vice chancellor Sam Glasscock III agreed to fast-track the Forescout-Advent dispute and scheduled a trial for the week of July 20.
Forescout had requested an expedited two-day trial this month; however, this request first has to be approved by the judge before the August 6 deadline, the filing said.
Forescout moved to take Advent International to court after the private equity giant refused to close the parties’ $1.9 billion pending transaction under claims of a material adverse effect. To resolve the case, the court will need to determine whether the MAE has actually occurred in the period since Advent agreed to acquire the company in early February.
An MAE has only been found one time in history. In 2018, the Delaware Court of Chancery found that an MAE had occurred with respect to the proposed sale of US generic drug maker Akorn to German pharmaceutical giant Fresenius KabiAcorn.
Advent, for its part, struck its all-cash deal to acquire Forescout on February 3. At $33 per share, the transaction valued the company at $1.9 billion. Crosspoint Capital Partners, a private equity firm focused on the cybersecurity and privacy industries, said it would take a minority stake alongside Advent.
But Advent on May 18 provided notice to Forescout that it would not be proceeding to consummate the acquisition on May 18, as scheduled. Read more on PE Hub.
In the legal complaint filed Wednesday, May 20, Forescout asked the Court to compel Advent to honor its commitments and immediately complete the pending take-private acquisition agreed upon three months earlier.
Advent, meanwhile, is arguing that Forescout has experienced a disproportionate effect on the company’s business relative to its direct peers, most of which have reported strong financial performance in the current environment. The decision was made after an extensive analysis that included information provided by Forescout, the company’s first-quarter 2020 financial results and a detailed forecasting exercise, said Advent.
The firm specifically points to the pandemic’s significant hit to Forescout’s top line. The company reported $57.2 million in total revenue for Q1, a 24 percent decline over the first quarter of 2019. The company attributed the decline to the economic downturn caused by covid-19 and uncertainty around its pending deal with Advent.
Advent is not the only firm that has attempted to scrap its deal in light of covid-19.
In May, the Delaware court denied American Express GBT’s request for an expedited trial to decide whether Carlyle Group and GIC can walk away from its $1.5 billion deal for a minority stake. In other words, the buyer group is seemingly poised to walk because of what is essentially a logistical issue, PE Hub reported.
Elsewhere, Realogy sued SIRVA Worldwide and Madison Dearborn Partners in Delaware, trying to stop them from backing out of a $400 million business unit sale over the Covid-19 pandemic.
Other suits have involved Sycamore Partners’ and L Brands, the parent of Victoria’s Secret chain. The firm’s $525 million agreed upon deal for a 55 percent stake in the retailer was called off on May 4.
Spokespeople for Forescout and Advent declined to comment beyond the statements.
Action Item: Read more about Advent and Forescout deal discussions on PE Hub.