Forescout to sue Advent for walking from deal agreement, CD&R reaps 2.5x on naviHealth exit, Secondaries deal flow picks up with ‘highly motivated sellers’

Morning Hubskis!

Hope you’re gearing up for a long weekend of … whatever. I’ll try and sneak some fishing in somewhere in there (don’t tell my wife!)

A reminder the Wire will be off on Monday for the Memorial Day holiday. Back on Tuesday as usual.

Update: We have another throwdown in the M&A world. A company called Forescout Technologies plans to sue Advent International for walking from its agreement to acquire the company in a deal valuing the company at $1.9 billion.

This is the latest in the (so far) only a handful of PE firms that have chose to walk from previously agreed deals because of the coronavirus downturn. These firms have invoked the dreaded material adverse effect clause as a way to break their deal agreements.

Forescout filed a complaint with Delaware Chancery Court charging that Advent violated terms of their merger agreement, writes Milana Vinn on PE Hub. The two came to the deal agreement February 6. Crosspoint Capital Partners said it would take a minority stake in the company alongside Advent.

Advent claimed a material adverse effect on Forescout’s business as justification for walking from the deal agreement. The company reported $57.2 million in revenue in the first quarter, a 24 percent drop over the same time period last year, Milana writes. Forescout said deteriorating performance, which it attributes to the economic downturn, was not reason enough to walk from the deal, Milana writes.

The company also said the merger agreement explicitly allocated the risk of pandemic impacts to Advent.

Advent/Forescout is the latest merger situation to head to court. Carlyle Group and Singapore sovereign wealth fund GIC chose to walk from their agreed investment in American Express GBT. AmexGBT took its complaint to Delaware Chancery Court, where a judge denied the company’s request for a speedier trial, a decision that essentially allows the firms to walk away. Lenders can terminate their agreement if the transaction doesn’t close by June 30, meaning without an expedited trial, the deal is likely finished.

Read Milana’s story here on PE Hub.

Coming Back: While talking about MAEs, I should also mention there appears to be activity coming back. We’ve seen a handful of interesting deals over the past couple weeks. And this is true for the M&A world as well as the secondaries side of the market.
Mostly this is on the small-side of the market, where one-off transactions are quietly getting closed mostly involving high net worth individuals and family offices. In this era, the first signs of life in secondaries are coming from “highly motivated sellers,” Fabrice Moyne, head of secondaries at Mantra Investment Partners, told me in a recent interview.

“Globally deal flow is not as strong as what it would have been six months ago, or a year ago. We’re seeing less deals, but most of the deals we worked on are deals where we have a reasonable chance to actually close with true motivated sellers as opposed to sellers testing the market,” Moyne said. Read my story here on Buyouts.

Top Scoops
Clayton Dubilier & Rice generated a 2.5x return on its investment in naviHealth through its sale to UnitedHealth Group’s Optum unit, writes Sarah Pringle on PE Hub. The deal marks a quick exit for CD&R, which acquired 55 percent of the company in 2018 from Cardinal Health. Cardinal retain a stake in naviHealth in the deal. It’s not clear where CD&R’s and Cardinal’s stakes stood at the time of the Optum deal, Sarah writes. Read her story here.

Northleaf Capital Partners hired Mike Moscaritolo as director in the private credit operations. Prior to Northleaf, Moscaritolo worked as chief financial officer at Timelo Investment Management responsible for valuation, internal controls and financial and management reporting for hedge funds. Read our news brief here.

Cooking: I feel like the lockdown is really unleashing pent up creative energy. Along with putting work in to the novel, I decided to start a cooking show. I’m cooking dinner all the time so why not record some recipes for posterity? Have you noticed some extra creativity in the lockdown? Let me know.

That’s it! Have a great rest of your day. Hit me up as always with tips n’ gossip, feedback or just to chat at cwitkowsky@buyoutsinsider.com, on Twitter or find me on LinkedIn.