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By Ava Benny-Morrison
Goldman Sachs Group Inc. was sued by a Hollywood business management firm that claims it was strung along as a mergers and acquisitions client while the bank pursued a much larger $7 billion deal with a private equity firm.
In a suit filed Thursday in New York state court, KSFB Management LLC said it was deceived by Goldman when it was seeking to sell itself in 2022. KSFB says it gave Goldman confidential information that helped the bank arrange Focus Financial Partners’ February 2023 acquisition by Clayton Dubilier & Rice LLC.
KSFB’s claims stem from a complicated series of transactions. Nigro Karlin Segal Feldstein & Bolno, the management firm led by legendary Hollywood accountant Mickey Segal, sold its operational assets to Focus, in 2018. Nigro Karlin’s principals then formed KSFB but continued to provide management services to Focus under contract. According to Variety, KSFB’s principals have managed business affairs for celebrities including Beyonce, Drake and Adam Levine.
Focus, an investment group specializing in wealth and business management firms, and its co-founder Leonard Chang were also named as defendants, as was Goldman banker Patrick Fels.
Goldman disputed the KSFB allegations. “As we said when the plaintiff tried — and failed — to bring this lawsuit in California, these claims are without merit,” Goldman spokesperson Sophia Anthony said. “From the outset of our engagement, Goldman Sachs acted fairly and honestly to run an efficient, competitive process.”
Focus didn’t immediately respond to requests for comment. Alex Spiro, the lawyer for KSFB, declined to comment.
Los Angeles Suit
The New York suit is the second filed by KSFB over the matter. The firm sued last year in Los Angeles, but that case was dismissed. Goldman had argued that New York was the appropriate forum for the claims.
According to the suit, Focus engaged Goldman in March 2022 to explore selling itself. Around the same time, KSFB claims it informed Focus that it was thinking of either selling its own business or becoming an independent firm. Focus and Goldman then schemed to keep KSFB on board in order to maximize the acquisition price for the former, the suit alleges.
Goldman allegedly told KSFB that it would work to pursue a joint sale of KSFB and the NKSFB unit of Focus. According to KSFB, the bank reassured it that there would be no conflict of interest with its work for Focus.
“These representations were false,” KSFB says. Unbeknownst to KSFB, Focus received its first offer from Clayton Dubilier in August 2022 and then spent months negotiating the price before the deal was announced in February 2023, the suit says.
According to KSFB, the Focus deal “spoiled the market” for its own sale and substantially decreased the smaller firm’s value. Meanwhile, Chang personally received more than $12 million in golden parachute compensation, and Goldman potentially reaped over $30 million in fees, the suit alleges
KSFB is seeking an undisclosed amount of damages for Goldman’s and Focus’ “fraudulent” conduct and violations of state law, including fraudulent inducement and breach of fair dealing.