Case 5:20-cv-05365 Document 1 Filed 08/04/20 Page 1 of 25
`
`David E. Bower (SBN 119546)
`MONTEVERDE & ASSOCIATES PC
`600 Corporate Pointe, Suite 1170
`Culver City, CA 90230
`Tel: (213) 446-6652
`Fax: (212) 202-7880
`dbower@monteverdelaw.com
`
`Counsel for Plaintiff Ronald Blackwell
`
`UNITED STATES DISTRICT COURT
`
`FOR THE NORTHERN DISTRICT OF CALIFORNIA
`
`SAN JOSE DIVISION
`
`RONALD BLACKWELL, Individually and
`on Behalf of All Others Similarly Situated,
`
`Civil Action No. 5:20-cv-5365
`
`Plaintiff,
`
`v.
`
`COMPLAINT
`
`CLASS ACTION
`
`FORESCOUT TECHNOLOGIES INC.,
`MICHAEL DECESARE, THERESIA
`GOUW, JAMES BEER, DAVID DEWALT,
`ELIZABETH HACKENSON, MARK
`JENSEN, KATHY MCELLIGOTT,
`ENRIQUE SALEM, and HEZY
`YESHURUN,
`
`Defendants.
`
`DEMAND FOR JURY TRIAL
`
`1. VIOLATION OF SECTION 14(e)
`OF THE SECURITIES EXCHANGE
`ACT OF 1934
`2. VIOLATION OF SECTION 20(a)
`OF THE SECURITIES EXCHANGE
`ACT OF 1934
`3. BREACH OF FIDUCIARY DUTIES
`
`Plaintiff Ronald Blackwell (“Plaintiff”), by his undersigned attorneys, alleges upon
`
`personal knowledge with respect to himself, and upon information and belief based upon, inter
`
`alia, the investigation of counsel as to all other allegations herein, as follows:
`
`NATURE OF THE ACTION
`
`1.
`
`This action is brought by Plaintiff as class action against Forescout Technologies,
`
`Inc. (“Forescout” or the “Company”) and the members of the Company’s board of directors
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`

`

`Case 5:20-cv-05365 Document 1 Filed 08/04/20 Page 2 of 25
`
`
`
`1
`
`(collectively referred to as the “Board” or the “Individual Defendants” and, together with
`
`2
`
`Forescout, the “Defendants”) for their violations of Sections 14(e) and 20(a) of the Securities
`
`3
`
`Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §§ 78n(e) and 78t(a), respectively. Plaintiff
`
`4
`
`also asserts a claim against the Individual Defendants for breaching their fiduciary duties under
`
`5
`
`state law. Plaintiff’s claims arise in connection with the proposed tender offer (“Tender Offer”) by
`
`6
`
`Ferrari Group Holdings, L.P. (“Parent”) and Ferrari Merger Sub, Inc. (“Merger Sub”), affiliates of
`
`7
`
`Advent International Corporation (together with Parent and Merger Sub “Advent”), to acquire all
`
`8
`
`of the issued and outstanding shares of Forescout (the “Proposed Transaction”).
`
`9
`
`2.
`
`On February 6, 2020, Forescout and Advent entered into an agreement and plan of
`
`10
`
`merger (the “Initial Merger Agreement”), pursuant to which Forescout’s shareholders would be
`
`11
`
`entitled to receive $33.00 per share in cash for each share of Forescout common stock they own
`
`12
`
`(the “Initial Consideration”). On March 3, 2020 Forescout issue a proxy statement soliciting
`
`13
`
`shareholders to vote in favor of the Initial Merger Agreement, and on April 23, 2020, Forescout
`
`14
`
`shareholders approved the Initial Merger Agreement.
`
`15
`
`3.
`
`However, three days before the Initial Merger was scheduled to close, Advent
`
`16
`
`informed Forescout that it had concluded that certain closing conditions provided in the Initial
`
`17
`
`Merger Agreement could not be met, and as a result Advent would not consummate the acquisition.
`
`18
`
`4.
`
`On July 15, 2020, Forescout entered into a new agreement and plan of merger with
`
`19
`
`Advent and its subsidiaries (the “Merger Agreement”), whereby shareholders of Forescout
`
`20
`
`common stock will receive $29.00 in cash for each share of Forescout stock they own (the “Offer
`
`21
`
`Price”).
`
`22
`
`5.
`
`In renegotiating a deal with Advent, the officers and directors of the Company
`
`23
`
`abandoned the interests of shareholders in pursuit of their own personal benefits. Indeed one of the
`
`24
`
`primary new features present in the Merger Agreement that was absent from the Initial Merger
`
`25
`
`Agreement is the ability for certain shareholders and certain holders of Forescout Stock-Based
`
`26
`
`Awards and/or Forescout Options, including Forescout's executive officers, to roll their equity
`
`27
`
`over into the combined company and continue to share in the future growth of the Company. This
`
`28
`
`rollover comes at the expense of common shareholders, who will now receive four dollars less per
`
`
`
`2
`
`CLASS ACTION COMPLAINT
`
`

`

`Case 5:20-cv-05365 Document 1 Filed 08/04/20 Page 3 of 25
`
`
`
`1
`
`share from the Initial Consideration. This unfair sales process represents a breach of the fiduciary
`
`2
`
`duties of the Individual Defendants.
`
`3
`
`6.
`
`On July 20, 2020, in order to convince Forescout shareholders to tender their shares,
`
`4
`
`the Board authorized the filing of a materially incomplete and misleading Schedule 14D-9
`
`5
`
`Solicitation/Recommendation Statement (the “Recommendation Statement”) with the Securities
`
`6
`
`and Exchange Commission (“SEC”). In particular, the Recommendation Statement contains
`
`7
`
`materially incomplete and misleading information concerning: (i) the Company’s financial
`
`8
`
`projections; (ii) the valuation analyses performed by the Company’s financial advisor, Morgan
`
`9
`
`Stanley & Co. LLC (“Morgan Stanley”); (iii) the conflicts of interest facing Morgan Stanley; (iv)
`
`10
`
`the conflicts of interest facing the Company’s officers and directors; and (v) the background of the
`
`11
`
`offer. These material misstatements and omissions represent violations of the Exchange Act and
`
`12
`
`breaches of the Individual Defendants’ duty of candor/disclosure.
`
`13
`
`7.
`
`The Tender Offer is scheduled to expire at the end of the day, one minute after
`
`14
`
`11:59 p.m., Eastern time on August 20, 2020 (the “Expiration Date”). It is imperative that the
`
`15
`
`material information that has been omitted from the Recommendation Statement is disclosed to
`
`16
`
`the Company’s shareholders prior to the forthcoming Expiration Date so they may make an
`
`17
`
`informed determination on whether to tender their shares.
`
`18
`
`8.
`
`For these reasons, and as set forth in detail herein, Plaintiff seeks to enjoin
`
`19
`
`Defendants from closing the Tender Offer or taking any steps to consummate the Proposed
`
`20
`
`Transaction, unless and until the material information discussed below is disclosed to Forescout
`
`21
`
`shareholders or, in the event the Proposed Transaction is consummated, to recover damages
`
`22
`
`resulting from the Defendants’ violations of the Exchange Act and breaches of fiduciary duty.
`
`23
`
`24
`
`JURISDICTION AND VENUE
`
`9.
`
`This Court has original jurisdiction over this action pursuant to Section 27 of the
`
`25
`
`Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331 (federal question jurisdiction) as Plaintiff
`
`26
`
`alleges violations of Sections 14(e) and 20(a) of the Exchange Act.
`
`27
`
`10.
`
`The Court has supplemental jurisdiction over the state law claim for breach of
`
`28
`
`fiduciary duty pursuant to 28 U.S.C. § 1367.
`
`
`
`3
`
`CLASS ACTION COMPLAINT
`
`

`

`Case 5:20-cv-05365 Document 1 Filed 08/04/20 Page 4 of 25
`
`
`
`1
`
`11.
`
`Personal jurisdiction exists over each Defendant either because the Defendant
`
`2
`
`conducts business in or maintains operations in this District, or is an individual who is either
`
`3
`
`present in this District for jurisdictional purposes or has sufficient minimum contacts with this
`
`4
`
`District as to render the exercise of jurisdiction over the Defendants by this Court permissible
`
`5
`
`under traditional notions of fair play and substantial justice. “Where a federal statute such as
`
`6
`
`Section 27 of the [Exchange] Act confers nationwide service of process, the question becomes
`
`7
`
`whether the party has sufficient contacts with the United States, not any particular state.” Sec. Inv’r
`
`8
`
`Prot. Corp. v. Vigman, 764 F.2d 1309, 1305 (9th Cir. 1985). “[S]o long as a defendant has
`
`9
`
`minimum contacts with the United States, Section of the Act confers personal jurisdiction over the
`
`10
`
`defendant in any federal district court.” Id. At 1316.
`
`11
`
`12.
`
`Venue is proper in this District under Section 27 of the Exchange Act, 15 U.S.C. §
`
`12
`
`78aa, as well as pursuant to 28 U.S.C. § 1391, because: (i) the conduct at issue took place and had
`
`13
`
`an effect in this District; (ii) Forescout maintains its principal place of business in this District and
`
`14
`
`each of the Individual Defendants, and Company officers or directors, either resides in this District
`
`15
`
`or has extensive contacts within this District; (iii) a substantial portion of the transactions and
`
`16
`
`wrongs complained of herein occurred in this District; (iv) most of the relevant documents
`
`17
`
`pertaining to Plaintiff’s claims are stored (electronically and otherwise), and evidence exists, in
`
`18
`
`this District; and (v) Defendants have received substantial compensation in this District by doing
`
`19
`
`business here and engaging in numerous activities that had an effect in this District.
`
`20
`
`21
`
`CLASS ACTION ALLEGATIONS
`
`13.
`
`Plaintiff brings this class action pursuant to Fed. R. Civ. P. 23 on behalf of himself
`
`22
`
`and the other public shareholders of Forescout (the “Class”). Excluded from the Class are
`
`23
`
`Defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated
`
`24
`
`with any Defendant.
`
`25
`
`26
`
`27
`
`28
`
`
`
`14.
`
`This action is properly maintainable as a class action because:
`
`a.
`
`The Class is so numerous that joinder of all members is impracticable. As
`
`of July 15, 2020, there were 49,602,911 shares of Forescout common stock outstanding,
`
`held by hundreds to thousands of individuals and entities scattered throughout the country.
`
`4
`
`CLASS ACTION COMPLAINT
`
`

`

`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`Case 5:20-cv-05365 Document 1 Filed 08/04/20 Page 5 of 25
`
`The actual number of public stockholders of Forescout will be ascertained through
`
`discovery;
`
`b.
`
`There are questions of law and fact that are common to the Class that
`
`predominate over any questions affecting only individual members, including the
`
`following:
`
`i)
`
`whether Defendants have misrepresented or omitted material
`
`information concerning
`
`the Proposed Transaction
`
`in
`
`the
`
`Recommendation Statement, in violation of Sections14(e) of the
`
`Exchange Act;
`
`ii)
`
`whether the Individual Defendants have violated Section 20(a) of
`
`the Exchange Act;
`
`iii)
`
`whether the Individual Defendants have breached their fiduciary
`
`duties; and
`
`iv)
`
`whether Plaintiff and other members of the Class will suffer
`
`irreparable harm if compelled to tender their shares based on the
`
`materially incomplete and misleading Recommendation Statement;
`
`c.
`
`Plaintiff is an adequate representative of the Class, has retained competent
`
`counsel experienced in litigation of this nature, and will fairly and adequately protect the
`
`interests of the Class;
`
`d.
`
`Plaintiff’s claims are typical of the claims of the other members of the Class
`
`and Plaintiff does not have any interests adverse to the Class;
`
`e.
`
`The prosecution of separate actions by individual members of the Class
`
`would create a risk of inconsistent or varying adjudications with respect to individual
`
`members of the Class, which would establish incompatible standards of conduct for the
`
`party opposing the Class;
`
`f.
`
`Defendants have acted on grounds generally applicable to the Class with
`
`respect to the matters complained of herein, thereby making appropriate the relief sought
`
`herein with respect to the Class as a whole; and
`
`5
`
`CLASS ACTION COMPLAINT
`
`

`

`Case 5:20-cv-05365 Document 1 Filed 08/04/20 Page 6 of 25
`
`
`
`1
`
`15.
`
`A class action is superior to other available methods for fairly and efficiently
`
`2
`
`adjudicating the controversy
`
`3
`
`4
`
`16.
`
`Plaintiff is, and has been continuously throughout all times relevant hereto, the
`
`PARTIES
`
`5
`
`owner of Forescout common stock.
`
`6
`
`17.
`
`Defendant Forescout is a Delaware corporation with its principal executive offices
`
`7
`
`located at 190 West Tasman Drive, San Jose, California 95134.
`
`8
`
`18.
`
`Defendant Michael DeCesare (“DeCesare”) is, and has been at all relevant times,
`
`9
`
`the Company’s President and Chief Executive Officer and a director of the Company.
`
`10
`
`19.
`
`Defendant Theresia Gouw (“Gouw”) is, and has been at all relevant times, the Chair
`
`11
`
`of the Company’s Board of Directors.
`
`12
`
`20.
`
`Defendant James Beer (“Beer”) is, and has been at all relevant times, a director of
`
`13
`
`the Company.
`
`14
`
`21.
`
`Defendant David DeWalt (“DeWalt”) is, and has been at all relevant times, a
`
`15
`
`director of the Company.
`
`16
`
`22.
`
`Defendant Elizabeth Hackenson (“Hackenson”) is, and has been at all relevant
`
`17
`
`times, a director of the Company.
`
`18
`
`23.
`
`Defendant Mark Jensen (“Jensen”) is, and has been at all relevant times, a director
`
`19
`
`of the Company.
`
`20
`
`24.
`
`Defendant Kathy McElligott (“McElligott”) is, and has been at all relevant times, a
`
`21
`
`director of the Company.
`
`22
`
`25.
`
`Defendant Enrique Salem (“Salem”) is, and has been at all relevant times, a director
`
`23
`
`of the Company.
`
`24
`
`26.
`
`Defendant Hezy Yeshurun (“Yeshurun”) is a co-founder of the Company and the
`
`25
`
`former Chair of Company’s Board of Directors, and has been at all relevant times, a director of
`
`26
`
`the Company.
`
`27
`
`28
`
`
`
`6
`
`CLASS ACTION COMPLAINT
`
`

`

`Case 5:20-cv-05365 Document 1 Filed 08/04/20 Page 7 of 25
`
`
`
`1
`
`27.
`
`The Defendants identified in paragraphs 18 through 26 are collectively referred to
`
`2
`
`herein as the “Board” or the “Individual Defendants,” and together with the Company, the
`
`3
`
`“Defendants.”
`
`4
`
`SUBSTANTIVE ALLEGATIONS
`
`5
`
`I.
`
`Background and the Proposed Transaction
`
`6
`
`28.
`
`Forescout is a provider of device visibility and control solutions. The Company
`
`7
`
`provides real-time identification, classification, assessment and continuous control over the
`
`8
`
`devices, that collectively, comprise an organization’s network. The Company’s network extends
`
`9
`
`across the campus information technology (IT) devices, the campus Internet of Things (IoT)
`
`10
`
`devices, operational technology (OT) devices, the data center and within the third-party cloud. The
`
`11
`
`Company offers Forescout platform, which provides organizations with situational awareness of
`
`12
`
`extended enterprise and the ability to orchestrate actions to reduce cyber risk. The Company offers
`
`13
`
`products such as eyesight, eyeSegment, eyeControl, eyeExtend, eyeManage and SilentDefense.
`
`14
`
`29.
`
`Advent is a private equity firm which invests in business, financial services,
`
`15
`
`healthcare, industrial, retail, consumer, and leisure sectors, as well as offers investment advisory,
`
`16
`
`wealth management, due diligence, and evaluation services. Advent has $48 billion in assets under
`
`17
`
`management.
`
`18
`
`30.
`
`In October 2019, Forescout hired Morgan Stanley to conduct a sales process. In
`
`19
`
`November 2019, Forescout originally prepared its operating plan for 2019-2023, referred to as the
`
`20
`
`Target Plan:
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`
`
`7
`
`CLASS ACTION COMPLAINT
`
`

`

`Case 5:20-cv-05365 Document 1 Filed 08/04/20 Page 8 of 25
`
`
`
`1
`
`31.
`
`In January 2020, Forescout management performed a bottoms-up analysis
`
`2
`
`reflecting a bottoms-up analysis of Forescout's sales pipeline, a bottoms-up expense analysis, and
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`Forescout's results for the fourth quarter of 2019, referred to as the Alternate Plan:
`
`
`32.
`
`Notably, the Alternate Plan significantly downgraded the Company’s projections
`
`for years 2020-2023. In March 2020—after the Initial Merger Agreement and once the Company
`
`was already sold—it was approved by the Forescout Board as Forescout's operating plan for 2020.
`
`33.
`
`On February 6, 2020, Forescout and Advent entered into the Initial Merger
`
`
`
`Agreement and issued a press release announcing it, which stated in relevant part:
`
`Forescout to be Acquired by Advent International in $1.9 Billion Transaction
`
`SAN JOSE, Calif., Feb. 06, 2020 (GLOBE NEWSWIRE) -- Forescout
`Technologies, Inc. (NASDAQ:FSCT, “Forescout”), the leader in device visibility
`and control, today announced that it has entered into a definitive agreement under
`which Advent International (“Advent”), one of the largest and most experienced
`global private equity investors, will acquire all outstanding shares of Forescout
`common stock for $33.00 per share in an all-cash transaction valued at $1.9 billion.
`Advent will be joined by Crosspoint Capital Partners (“Crosspoint Capital”), a
`private equity investment firm focused on the cybersecurity and privacy industries,
`as a co-investor and advisor.
`
`The purchase price represents a premium of approximately 30% over Forescout’s
`closing share price of $25.45 on October 18, 2019, the last full trading day prior to
`the release of the 13-D filings by Corvex Management L.P. and Jericho Capital
`Asset Management L.P. on October 21, 2019, which disclosed they had formed a
`partnership to approach Forescout and accumulated a combined 14.5% ownership
`in the company. Upon completion of the transaction, Forescout will become a
`private company with the flexibility to continue investing in the development and
`deployment of leading-edge cybersecurity products and solutions that serve the
`evolving needs of enterprise customers. CEO and President Michael DeCesare will
`continue to lead the company, and Forescout will continue to be headquartered in
`San Jose, California.
`
`“Forescout has established itself as a leader in device visibility and control, with
`the most advanced platform in the market,” said Michael DeCesare, CEO and
`
`8
`
`CLASS ACTION COMPLAINT
`
`

`

`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`Case 5:20-cv-05365 Document 1 Filed 08/04/20 Page 9 of 25
`
`President, Forescout. “We are still in early innings of a large market opportunity as
`every organization needs visibility into what is connecting to their network and how
`to mitigate against high risk devices, including non-traditional IoT and OT devices.
`This transaction represents an exciting new phase in the evolution of Forescout. We
`are excited to be partnering with Advent International and Crosspoint Capital,
`premier firms with security DNA and track records of success in strengthening
`companies and supporting them through transitionary times. We look forward to
`working with Advent and Crosspoint Capital to advance our strategic objectives
`and want to thank our employees for their continued hard work and commitment to
`Forescout.”
`
`“We are pleased to have reached this agreement with Advent, which delivers
`significant immediate value to shareholders, and positions Forescout to continue
`meeting and exceeding the expectations of our customers,” said Theresia Gouw,
`Chair of the Forescout Board. “This transaction, which is the result of a robust
`process conducted by the Board of Directors with the assistance of independent
`legal and financial advisors, is a testament to the value Forescout has created and
`the reputation our team has built. In making its determination, the Board of
`Directors considered the likely volatility associated with the business model
`transition to ratable revenue recognition, changes to our go-to-market initiatives,
`particularly in EMEA, and timing of significant eight-figure deals, while managing
`to quarterly street estimates as a publicly traded company. We are confident that
`this transaction is the best path forward for Forescout and our stakeholders.”
`
`“Forescout is an ideal partner for Advent — as it’s a mission-critical business
`positioned to capitalize on key tech megatrends,” said Bryan Taylor, head of
`Advent’s technology investment team and a Managing Partner in Palo Alto. “The
`company has differentiated itself from its core competitors with its proprietary,
`agentless technology, making it ideal for large, complex organizations in a rapidly
`evolving cyber risk landscape. In partnership with Greg Clark and the Crosspoint
`Capital team, Advent is thrilled to work with Forescout to build on its record of
`innovation and continue delivering world-class cybersecurity solutions to
`customers for years to come.”
`
`“As enterprises continue to shift to the cloud and decentralized networks, today’s
`chief information security officers are looking for secure solutions to increase
`visibility and provide orchestration, making their network controls more seamless,”
`said Greg Clark, Managing Partner at Crosspoint Capital. “Forescout’s platform is
`already ahead of the curve, and we believe we can further advance the company’s
`market position by applying
`the collective experience and expertise
`in
`cybersecurity software of the Advent and Crosspoint Capital team.”
`
`Transaction Details
`
`Under the terms of the agreement, which has been unanimously approved by the
`Forescout Board of Directors, Forescout shareholders will receive $33.00 in cash
`for each share of common stock they own.
`
`The agreement includes a 30-day "go-shop" period expiring on March 8, 2020,
`which permits Forescout’s Board of Directors and advisors to solicit alternative
`acquisition proposals from third parties. Forescout will have the right to terminate
`the merger agreement to enter into a superior proposal subject to the terms and
`conditions of the merger agreement. There can be no assurance that this "go-shop"
`will result in a superior proposal, and Forescout does not intend to disclose
`developments with respect to the solicitation process unless and until it determines
`such disclosure is appropriate or is otherwise required.
`
`
`9
`
`CLASS ACTION COMPLAINT
`
`

`

`Case 5:20-cv-05365 Document 1 Filed 08/04/20 Page 10 of 25
`
`
`
`The transaction is expected to close in the second calendar quarter of 2020, subject
`to customary closing conditions, including approval by Forescout shareholders and
`receipt of regulatory approvals. Upon completion of the transaction, Forescout
`common stock will no longer be listed on any public market.
`
`Fourth Quarter and Full Year 2019 Conference Call Update
`
`Separately, Forescout today announced its fourth quarter and full year 2019
`financial results, which are available on the “Investor Relations” section of the
`Forescout website. In light of the announced transaction with Advent International,
`Forescout has cancelled the earnings conference call previously scheduled for
`February 6, 2020, at 1:30pm PT (4:30pm ET).
`
`Advisors
`
`Morgan Stanley & Co. LLC is serving as exclusive financial advisor to Forescout
`and Wilson Sonsini Goodrich & Rosati is serving as legal counsel. Ropes & Gray
`is serving as legal counsel to Advent International and financing for the transaction
`is being arranged and provided by Owl Rock Capital.
`
`34.
`
`On March 3, 2020, the Company filed its preliminary proxy statement soliciting
`
`shareholder approval for the Initial Merger Agreement, which provided shareholders with both the
`
`Target Plan and the Alternate Plan. On March 24, 2020, the Company filed its definitive proxy
`
`statement and set the shareholder vote for the Initial Merger Agreement for April 23, 2020, which
`
`corrected the discrepancy in the treatment of amortization of intangibles for both the Target Plan
`
`and the Alternate Plan. On April 23, 2020 Forescout shareholders approved the sale of the
`
`Company in exchange for $33 per share pursuant to the Initial Merger Agreement.
`
`35.
`
`On May 11, 2020, Forescout announced poor results for the first quarter of 2020,
`
`primarily due to the effect of the COVID-19 pandemic. Individual Defendant DeCesare
`
`commented:
`
`In March, the severity of the COVID-19 pandemic sharply escalated around the
`world, causing some customers to delay purchasing decisions in order to prioritize
`employee health and safety and business continuity planning. As organizations
`have shifted to remote workforces, their network footprint has evolved but the need
`for visibility and control of all devices on the network remains imperative,
`regardless of whether devices reside within the confines of corporate offices or in
`remote, work from home environments. Forescout’s platform is uniquely
`positioned to help enterprises in today’s perimeter-less world and defend against
`increasingly sophisticated cyber threats. We look forward to completing our
`pending transaction with Advent International Corporation, which will position us
`for long-term success as we execute on our large and growing market opportunity.
`
`36.
`
`On May 15, 2020, news broke that Advent was pulling out of the Initial Merger
`
`Agreement, and that the merger would not be completed as scheduled. On May 18, 2020, Forescout
`
`issued a press release stating, in relevant part:
`
`10
`
`CLASS ACTION COMPLAINT
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`

`

`Case 5:20-cv-05365 Document 1 Filed 08/04/20 Page 11 of 25
`
`
`
`
`On May 15, 2020, Advent provided notice to Forescout that it would not be
`proceeding to consummate the acquisition of Forescout on May 18, 2020, as
`scheduled. Forescout and Advent are engaged in ongoing discussions regarding
`timing to close and the terms of the transaction. There can be no assurance that
`Forescout and Advent will be able to reach agreement on terms.
`
`“This is an uncertain time for everyone, as businesses and communities across the
`world navigate the challenges created by the COVID-19 pandemic,” said Michael
`DeCesare, CEO and President of Forescout. “We continue to believe that Advent
`is the right partner for Forescout and we remain committed to completing the
`transaction in the near-term. We thank our employees for their extraordinary efforts
`and commitment to Forescout, and we remain focused on continuing our course of
`advancing our
`innovation
`roadmap and strategic cloud and business
`transformation.”
`
`37.
`
`On May 19, 2020, Forescout sued Advent in Delaware Chancery Court for
`
`breaching the Initial Merger Agreement and seeking specific performance of the Initial Merger
`
`Agreement. On May 20, 2020, Forescout issued a press release stating, in relevant part:
`
`On May 15, 2020, Advent notified Forescout that it would not consummate the
`acquisition on May 18, 2020, as scheduled. Advent’s purported excuse for its
`wrongful conduct is that a closing condition to the transaction has not been satisfied
`because a “material adverse effect” has occurred at Forescout. Forescout believes
`that no material adverse effect has occurred, that all closing conditions are satisfied,
`and that Advent is obligated to close the transaction. Forescout believes that Advent
`has relied on meritless excuses to support its position.
`
`The merger agreement explicitly allocated the risk of any impacts from COVID-19
`to Advent. Since announcing
`the
`transaction, Forescout
`shareholders
`overwhelmingly approved the transaction.
`
`“We have satisfied all conditions to closing under our merger agreement, and a
`material adverse effect has not occurred,” said Theresia Gouw, Chair of the
`Forescout Board. “The only change since the merger agreement was jointly
`executed in February is the deepening of the COVID-19 pandemic, which has
`significantly impacted global macro-economic conditions. All companies have
`been challenged by this pandemic, and it is highly disappointing that Advent would
`attempt to exploit market volatility to renege on its contractual obligations,
`particularly when the merger agreement explicitly excludes the effects of a
`pandemic as a material adverse event. Advent is required to promptly complete the
`transaction. We are taking immediate action to enforce Forescout’s rights and
`ensure that Advent fulfills its obligations. We are confident that the steps that we
`are taking are in the best interests of Forescout and its shareholders.”
`
`“I remain confident in the strength of Forescout and its incredible team,” said
`Michael DeCesare, CEO and President of Forescout. “Forescout is in a strong
`financial position, with $100 million of cash on hand as of March 31, 2020. We are
`well positioned for success and the fundamentals of our business have not changed.
`Customers around the world trust Forescout to help solve their most pressing
`security challenges, and that’s exactly what we are doing.”
`
`11
`
`CLASS ACTION COMPLAINT
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`

`

`Case 5:20-cv-05365 Document 1 Filed 08/04/20 Page 12 of 25
`
`
`
`1
`
`38.
`
`On May 30, 2020, Advent filed counterclaims alleging that Forescout breached the
`
`2
`
`Initial Merger Agreement and that certain conditions to closing thereunder could not be met. An
`
`3
`
`expedited trial schedule was granted with the trial set to take place on July 20, 2020.
`
`4
`
`39.
`
`On June 30, 2020, Forescout closed out their second quarter for 2020. On July 1,
`
`5
`
`2020, Forescout provided Advent with certain preliminary information regarding the results of
`
`6
`
`Forescout's second quarter of 2020. On July 8, 2020, Forescout publicly announced its positive
`
`7
`
`preliminary financial results for the second quarter of 2020, including revenue in the range of $78-
`
`8
`
`$82 million, up 40% quarter-over-quarter at the midpoint of the range. Individual Defendant
`
`9
`
`DeCesare commented: “I am extremely proud of our team’s performance. We remained focused
`
`10
`
`and executed well, despite macroeconomic challenges and the impact of ongoing litigation with
`
`11
`
`Advent International. The strength of our quarterly results shows the compelling value proposition
`
`12
`
`for Forescout’s solutions and that we can execute and deliver despite obstacles. We believe
`
`13
`
`Advent’s claims are without merit, and we are continuing to pursue our rights under the existing
`
`14
`
`merger agreement.”
`
`15
`
`40.
`
`On July 12, 2020, Forescout and Advent tentatively came to terms on the Proposed
`
`16
`
`Transaction at $29 per Forescout share. Members of the Board’s Strategic Committee then
`
`17
`
`discussed the various financial cases that could be used for the purposes of Morgan Stanley's
`
`18
`
`financial analysis of Forescout. Early on July 15, 2020, before the opening of trading on Nasdaq,
`
`19
`
`the Amended Merger Agreement was signed by Forescout, Parent and Purchaser, and Forescout
`
`20
`
`and Advent publicly disclosed the entry into the Amended Merger Agreement. Contemporaneous
`
`21
`
`with signing the Amended Merger Agreement, Forescout and Advent also signed a settlement
`
`22
`
`agreement to settle and dismiss with prejudice all claims and defenses in the Advent Litigation.
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`41.
`
`On July 15, 2020, Forescout and Advent issued a joint press release, which stated
`
`in relevant part:
`
`Forescout and Advent International Reach Amended Merger Agreement
`
`• Forescout Shareholders to Receive $29.00 Per Share
`• Advent to Commence Tender Offer; Forescout Board Unanimously
`Recommends that all Shareholders Tender Their Shares in Support of the
`Transaction
`• Agreement Provides Immediate and Certain Value
`
`
`12
`
`CLASS ACTION COMPLAINT
`
`

`

`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`Case 5:20-cv-05365 Document 1 Filed 08/04/20 Page 13 of 25
`
`SAN JOSE, Calif. and BOSTON, Mass., July 15, 2020 (GLOBE NEWSWIRE) --
`Forescout Technologies, Inc. (FSCT), the leader in device visibility and control,
`and Advent International (“Advent”), one of the largest and most experienced
`global private equity investors, today announced that the companies have agreed to
`amend the terms of their previously announced transaction. The Forescout Board
`of Directors has unanimously approved a revised definitive agreement under which
`Advent will acquire all outstanding shares of Forescout common stock for $29.00
`per share. Advent has partnered with Crosspoint Capital Partners, a private equity
`investment firm focused on cybersecurity and privacy industries, as an advisor on
`this transaction.
`
`Concurrently with executing the amended merger agreement, Forescout and
`Advent reached a settlement agreement as a result of which the pending litigation
`in the Delaware Court of Chancery will be dismissed.
`
`“We continue to believe that