A Hollywood business manager whose clients have included Madonna and Drake has sued Goldman Sachs alleging it tricked him into handing over business secrets as part of an effort to agree a $7bn deal with a private equity firm.
Show business impresario Mickey Segal’s lawsuit focuses on the Wall Street bank’s role when Clayton, Dubilier & Rice, the New York-based buyout group, purchased Focus Financial Partners, a listed wealth management firm, in February.
Segal had hired Goldman to sell his celebrity concierge service, a much smaller firm called NKSFB, which has previously received investment from Focus. In a lawsuit filed in Los Angeles county court last week, he accused Goldman of “secretly dealing behind [his] back” by “shop[ping] around” a proposed sale of the larger firm as well.
Anyone “interested in acquiring [NKSFB]”, Segal’s lawyers complained, “may be even more interested in acquiring the larger firm”.
The messy dispute, involving several top Wall Street firms, shows how the lives and business affairs of top-flight entertainers have created lucrative opportunities for money managers and fixers operating in rarefied circles where discretion is highly prized.
Segal sold a majority economic stake in NKSFB to Focus shortly before the latter’s 2018 initial public offering. At the time, the larger company was seeking to branch out from its core business of buying stakes in wealth management boutiques. It was drawn to NKSFB, which co-ordinates the public appearances of its high-profile clients, as well as helping to buy their cars and houses, hire their chefs and nannies, file their taxes, pay their bills, and submit their medical claims.
Last year, however, Segal and his partners decided they wanted to part company with Focus. They hired Goldman to explore a sale of the business, unaware that Goldman was simultaneously working on a deal to take Focus private.
Segal worked with Goldman to pitch NKSFB to at least a dozen potential suitors over several months. At one meeting, held in December, Segal sought to impress executives from KKR with a client roster that includes entertainers who have played the half-time show in 13 of the past 15 American football Super Bowls, according to two people familiar with the exchange.
KKR did not bid but five other would-be acquirers eventually submitted offers for NKSFB, each offering hundreds of millions of dollars. But CD&R’s $7bn deal to take Focus private, announced in February, prompted Segal to sue Focus and Goldman, and has thrown the auction of his own company into disarray.
In an exchange of emails, reproduced in court filings, Segal told Focus co-founder Lenny Chang that an “amicable meeting” was impossible. He suggested buying back Focus’s share of NKSFB “at a substantial discount”, saying it “may be the only way to stop a nuclear war”.
But Chang wrote: “We would not sell at a discount.”
Focus maintains that it was not seeking to stop the sale of NKSFB. In a letter, a Focus lawyer told Segal that “the sales process should be moving to the second round, but has been delayed by your disruptive actions”.
Focus said in a statement that Segal’s lawsuit was without merit, and accused him of “attempting to take advantage of Focus’ pending go-private acquisition to increase the economics he derives from the Focus partnership”.
Goldman said it had acted fairly and honestly, and also dismissed the lawsuit as meritless. “[We] had every incentive to achieve the best outcomes for both our clients, and it is absurd to suggest otherwise,” the bank added.