Counterclaim filed in Sequoia legal action
Sequoia Financial Group has received a defence and counterclaim from Tim McGowen regarding the acquisition of Informed Investor.
In February, it was announced that Sequoia had commenced proceedings against McGowen alleging that he breached various warranties and provisions of the share purchase deed. The licensee is seeking damages of $3.5 million.
According to McGowen’s LinkedIn profile, he is the managing director of Informed Investor, managing partner at Corporate Connect and managing director of ShareCafe. Back in 2022, Sequoia said McGowen would join the firm as the head of its Direct division.
It was hoped the acquisitions would provide increased delivery of premium information and finance news to Sequoia’s client base, and assist in developing a digital and educational content platform for fund managers, ASX-listed companies, and the financial services industry.
In a business update in January 2023, the firm acknowledged the integration of the three companies had taken “longer than anticipated” and that it was “causing short-term pain to its bottom line”.
In a statement on 8 April, the firm said it has now received a defence and counterclaim from McGowen, stating: “McGowen is counterclaiming damages in excess of $1.1 million, the bulk of which comprises the deferred consideration that Sequoia did not issue McGowen in light of the claims Sequoia has raised against McGowen.
“In anticipation of receipt of the defence and counterclaim, Sequoia has carried a contingent liability.”
When the firm announced its half-year results in February 2024, Sequoia chief executive Garry Crole commented on the impact that the deal had had on the company and how it is working to restructure.
Crole said: “I put my hand up, we made an error in acquiring this business for the price we paid, it was not what we had been led to believe. We have tried to settle on a number of occasions unsuccessfully but are going now to court. But there is an absolute place for the direct investment arm in the business.”
Staff in the division have been reduced from around 13 to six, and it appointed Paul Sanger as head of Sequoia Direct. The firm said it has invested in the restructure of the division in order to allow it to return to profit in the second half of the year.
“We incurred a considerable expense on marketing for this division (in excess of $200,000) to drive more business from our licensee services customer base. Additional expenditure was also incurred for the restructure as we reduced the headcount in this division. We believe these changes will positively impact our EBITDA for 2H24 onwards.”
AUTHOR
Laura Dew
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