Goldman Sachs has been sued by a Hollywood businessman whose clients include Madonna and Drake. He claims that Goldman Sachs tricked him into giving up business secrets in an attempt to reach a $7bn agreement with a private equity firm.
The lawsuit by Mickey Segal, a show business impresario, focuses on the role of the Wall Street bank when Clayton, Dubilier & Rice, a New York-based buyout firm, bought Focus Financial Partners, a listed wealth manager company in February.
Segal had hired Goldman to help him sell his celebrity concierge service. NKSFB was a smaller company that had received investment from Focus. He filed a lawsuit in Los Angeles County court last week accusing Goldman of “secretly dealing behind his back” by “shop[ping] about” the sale of the larger company.
Segal’s lawyers remarked that anyone “interested” in purchasing [NKSFB] “may be more interested in acquiring a larger firm”.
This messy dispute, which involved several top Wall Street organizations, shows how the personal and business lives of top-flight entertainers have created lucrative opportunity for money managers and fixers working in highly confidential circles.
Segal sold a majority of NKSFB’s economic stake to Focus just before the latter’s 2018 initial public offering. The larger company wanted to diversify from its core business, which was buying shares in wealth management boutiques. NKSFB was the ideal choice as it coordinates public appearances for high-profile clients and also helps to purchase their homes and cooks, pay their bills, and file their taxes.
Segal and his associates decided last year to sell Focus. They hired Goldman to look into a sale of Focus, but they didn’t realize that Goldman was also working on a deal for Focus’ privatization.
Segal and Goldman worked together to present NKSFB to at most a dozen potential suitors. This took place over several months. According to two people familiar, Segal tried to impress executives at KKR by presenting a client list that included entertainers who have played half-time in 13 of the 15 American football Super Bowls.
KKR didn’t bid, but five other potential buyers submitted offers for NKSFB. Each offered hundreds of millions of dollars. Segal sued Focus and Goldman after CD&R announced a $7bn deal in February to take Focus private. This has caused the auction to be canceled.
Segal informed Lenny Chang, Focus’s co-founder, that it was impossible to have an “amicable” meeting in an email exchange. Segal suggested that Focus buy back its share of NKSFB at a significant discount, saying that it was “the only way to end a nuclear war”.
Chang said, “We wouldn’t sell at a discounted price.”
Focus claimed it wasn’t trying to stop NKSFB’s sale. Segal was informed by a Focus lawyer that the sales process should have moved to the second round. However, Segal was delayed by your disruptive actions.
Focus stated in a statement that Segal was not entitled to a lawsuit and that he had “tried to take advantage” of Focus’ pending acquisition to boost the economics derived from the Focus partnership.
Goldman stated that it had acted honestly and fairly and dismissed the suit as unfounded. The bank stated that it had every incentive to get the best outcome for our clients and that it was absurd to suggest otherwise.