Forescout Technologies Inc is a cybersecurity company that has put a claim on Advent International Corp on May 20, 2020. The company asks the court to take action against the private equity company to fulfill 1.9 billion dollars buyout that the company agreed in February 2020.
This legal action is initiated after Advent turned down and denied to close the deal. The decision was in response to the decreasing condition of the economy following the coronavirus pandemic, as informed by Forescout.
The Excuse Behind Advent’s Wrongful Conduct
Recently, Forescout made a statement regarding Advent in a press release. According to Forescout, Advent made an excuse for its unfair conduct. They made a defensive statement that the final transaction has not been contended due to the adverse material effects that have happened at Forescout.
Advent also stated that when the legal action was filed, the company was in negotiation with Forescout, which was about the alternative transaction. The entire team of Forescout is unsatisfied that the company has changed its mind and now wants to go for litigation. As a result, Advent is ready to respond and will strongly defend its position in the court.
Forescout concluded that they have fulfilled their all closing conditions. However, Advent has turned on to its groundless excuses to support its position. The current development events sent Forescout’s shares plunging to an all-time low on May 20, 2020.
Shares were dropped to 8.33 dollars during the opening of the trading day. Advent admitted to paying 33 dollars on February 6 in order to take the share of Forescout private.
Forescout in its legal response commented that the agreement regarding their sale notably allocated the risk of impacts due to COVID-19 to Advent. Since the tie-up and agreement between the two companies, the only modification that took place has now concurrently executed in February. The current crisis of COVID-19 pandemic has highly influenced the entire global macroeconomic conditions.
Theresia Gouw is managing director and co-founder of Advent ventures. According to her, all companies and organizations have been affected by this pandemic. It is highly unacceptable that Advent seems to make the use of the market’s volatility to go back on its contractual obligations. It will initiate it especially when the tie-up agreement notably removes the effects of the pandemic as a material adverse effect.
What led the Downfall Of Forescout?
According to Advent, Forescout has experienced an unequal effect on their company’s business in terms of its direct peers. Many of their members also declared a firm’s financial performance in the current scenario.
In the Mid of may Forescout reported a 78% rise in these three months’ net loss as compared to 2019. Moreover, its revenue fell by about 24%. It also reported that it removed around 90 employees during these last three months.
Forescout supports companies with technology and guides them to look at the devices that are linked to their networks. The tie-up with Advent happened when their company was moving to a revenue model of software as a service subscription. As a result, the company was targeted by the class action lawyers and activist investors from its last fall.
The sale of Forescout is the current latest in the version of private equity deals and now has been hindered due at the time of COVID 19 pandemic. Other losses suffered by Forescout during crisis include denial of deal with Sycamore.
A $525 deal has been canceled on their behalf to acquire Victoria Secret’s lingerie business. Sycamore Partners is a private equity firm under L Brands Inc LB.Net.