In the high-stakes world of private equity, even the best-laid plans can go off course. Our client, a successful private equity fund, learned this the hard way when they hired a placement agent to help raise $350 million in capital. What started as a promising partnership quickly spiraled into disappointment, and eventually, a lawsuit. Thanks to WG’s strategic defense efforts, the client was able to favorably resolve the dispute and focus its resources back on its business.
The Setup: A Promising Deal Turns Sour
The journey began when the private equity firm set its sights on raising $350 million for its next fund. It brought in a placement agent to help secure funds in exchange for a percentage of the total amount raised.
But what was supposed to be a fruitful collaboration soon became a cause for concern. Weekly check-ins revealed that the agent was far from delivering results. Promises were made, but very little action was taken.
Frustrated and out of patience, the fund fired the placement agent, took over the fundraising itself, and – within a short period after – closed the fund on its own.
The Legal Showdown: A $1M Lawsuit Emerges
Instead of walking away, the placement agent filed a lawsuit, demanding full payment under the original contract. Unfortunately, on the face of it, the lawsuit seemed strong due to issues related to the effectiveness of the notice of termination and the arguably unclear performance deliverables. Nevertheless, we did a deep dive into the data to identify all viable defenses and strategies. Every email, phone call, and contact made by the placement agent was scrutinized. Through comprehensive due diligence, we identified strong legal theories backed by aggregate data reflecting the failures of the agent to perform including deficient performance compared to industry customs and practices.
The Turning Point: A Smart Settlement
Based on the evidence gathered, we initiated settlement discussions centered around the corresponding legal theories. After months of back-and-forth negotiations, we managed to obtain a highly favorable settlement for the client amounting to just over what was technically owed and what the client offered to pay prior to the commencement of the lawsuit.
The Takeaway: A Victory Worth More Than Dollars
This case is a testament to the importance of strategy and targeted discovery. It also illustrates common scenarios where business disputes can be and often are resolved through settlements instead of trial. Here, we helped the client avoid the inevitable and substantial costs of further litigation including depositions, experts and trial, as well as the inherent risks and unpredictability of any trial.
Of course, as trial lawyers, WG is always ready and anticipates going to trial. However, as businesspeople ourselves and our perceived role of quasi business partners with our clients, we are always open to and encourage resolution of disputes when proper.
Certain details have been modified in the interest of privacy.