Sequoia resolves legal action after acquisitions
A dispute between Sequoia Financial Group and individual Tim McGowen regarding a problematic acquisition of three companies has been resolved.
It was announced in February 2024 that Sequoia had commenced proceedings in the Supreme Court of Victoria against McGowen. This related to an acquisition in 2022 of ShareCafe, Corporate Connect and Informed Investor, where McGowen was the managing director.
At the time of the acquisition, McGowen was expected to be the head of Sequoia’s Direct division and it was hoped the three companies 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.
However, Sequoia acknowledged the integration of the three companies had taken “longer than anticipated” and that it was “causing short-term pain to its bottom line” and opted to commence legal action. The delays had caused the Direct division to fall short of the EBITDA budget by $500,000, it said.
“Sequoia alleges that Mr McGowen has breached various warranties and provisions of the share purchase deed and is seeking damages in the order of $3,500,000,” the firm said in February 2024.
In April 2024, McGowen filed a counterclaim and defence where he was seeking damages in excess of $1.1 million.
The troubles surrounding the acquisition were among the reasons that several Sequoia shareholders sought to unsuccessfully make changes to its board earlier this year.
At the time, the shareholders stated: “The new directors will improve corporate governance and ensure that the significant cash balance available to Sequoia does not result in a repeat of acquisitions like ShareCafe.”
Chief executive Garry Crole countered that the affected division had since been “restructured to capture service efficiencies and new customers”.
In an ASX statement on 16 August, Sequoia said the court case between the firm and McGowen had been resolved with a confidential settlement.
“Sequoia Financial Group Ltd is pleased to announce that the dispute with Mr Tim McGowen relating to the purchase of the issued share capital in Informed Investor, ShareCafe and Corporate Connect Research has been resolved by the parties.
“The terms of settlement, which are confidential between the parties, were made without admission of liability by either party and concludes the matter.”
It said there would be no material impact from this to its FY24 results other than legal costs.
AUTHOR
Laura Dew
Recommended for you
Net cash flow on AMP’s platforms saw a substantial jump in the last quarter to $740 million, while its new digital advice offering boosted flows to superannuation and investment.
Insignia Financial has provided an update on the status of its private equity bidders as an initial six-week due diligence period comes to an end.
A judge has detailed how individuals lent as much as $1.1 million each to former financial adviser Anthony Del Vecchio, only learning when they contacted his employer that nothing had ever been invested.
Having rejected the possibility of an IPO, Mason Stevens’ CEO details why the wealth platform went down the PE route and how it intends to accelerate its growth ambitions in financial advice.
