Forescout MAE Litigation

In February 2020, Advent agreed to acquire Forescout for $33 per share in cash for total consideration of approximately $1.9 billion. Following the start of the COVID-19 pandemic, on May 15, 2020, Advent notified Forescout that it would not close the transaction as originally scheduled, arguing that a material adverse effect (MAE) had occurred and was continuing. In May 2020, Forescout filed suit in the Delaware Court of Chancery seeking to compel Advent to comply with their contractual obligation to close the transaction. The Court agreed to expedite the trial and set a trial date in July 2020.

Counsel for Forescout retained Compass Lexecon and Professor Daniel R. Fischel to evaluate the economic evidence and opine on the MAE issue. Professor Fischel filed several reports and was deposed in the case. He opined, among other things that Forescout had not experienced a substantial decline in financial and operating performance, consistent with the MAE definition in the merger agreement, that Forescout’s performance was not disproportionately poor relative to its peers, and that Advent’s expert’s analyses were fundamentally flawed. Shortly before trial, the parties reached an agreement to move forward with the deal at a lower price of $29 per share, a reduction of 12% from the initially agreed upon price and a premium of nearly 16% to Forescout’s most recent closing stock price.

Compass Lexecon President Professor Daniel R. Fischel was retained by Wilson Sonsini Goodrich & Rosati, counsel for Forescout, to analyze the valuation effects of the alleged adverse events on Forescout’s standalone value. Professor Fischel was assisted by a team that included Ed Grgeta, Constance Kelly, Quinn Johnson, Jessica Mandel, and others. We worked with Steven Guggenheim, Ignacio Salceda, Becky Epstein, and others of Wilson Sonsini.