WPP Sues Private Equity Firms Over Digital Media Acquisition

(Bloomberg) -- WPP Plc sued two private equity firms over a $300 million purchase of a digital retail media company three years ago, claiming they misrepresented the state of its finances and artificially inflated its value, causing the ad giant to lose more than $120 million.

WPP agreed to buy Triad Retail Media in October 2016 from entities formed by Detroit-based Rockbridge Growth Equity LLC and Boston-based Falcon Strategic Partners.

According to the lawsuit the PE firms waited until two weeks after the sale was completed to reveal the real health of Triad’s finances with revised projections for 2016 showing that revenue for the year would be tens of millions dollars less than had been forecast before the purchase. Earnings before interest, taxes, depreciation and amortization were expected to be less than half of what had been forecast.

“In other words, just two weeks after closing, WPP was told that the company was not worth anything close to the $300 million purchase price it had just paid,” WPP said in the complaint. “Triad’s shortfall was so large, and came so soon after the closing, that it is implausible that Triad’s executives did not see the shortfall coming.”

Target Corp. was in preliminary talks to buy Triad from WPP, the Wall Street Journal reported in May, citing people familiar with the matter whom the paper didn’t name.

St. Petersburg, Florida-based Triad, which counts Walmart Inc. and EBay Inc. as clients, allows retailers to advertise to online shoppers while they’re browsing and making purchases on mobile phones and websites.

The private equity firms didn’t immediately respond to requests for comment.

The case is WPP Group USA Inc. v RB/TDM Investors LLC, New York State Supreme Court, New York County.

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