throbber
IN THE COURT OF CHANCERYOF THE STATE OF DELAWARE
`
`Transaction ID 70397331 =; fa
`
`EFiled: Jul 14 2023 04:29PM:Ebr:
`Case No. 2023-0699-JTL WAY2:Es}
`
`OFpS
`
`
`
`
`TRIFECTA MULTIMEDIA
`HOLDINGSLLC, and DAVE
`YOUNG,
`
`
`
`C.A. No. 2023-0699-JTL
`
`PUBLIC VERSIONFILED:
`July 14, 2023
`
`Plaintiffs,
`
`Vv.
`
`WCG CLINICAL SERVICES LLC,
`
`
`
`
`
`
`
`
`Defendant.
`
`
`VERIFIED COMPLAINT
`
`1.
`
`After using abject
`
`falsehoods to induce Plaintiff Dave Young
`
`
`(“Young”) to sell Trifecta Multimedia, LLC (“Trifecta”), Young’s successful
`
`healthcare technology company, Defendant WCGClinical Services LLC (““WCG”),
`
`a multibillion-dollar portfolio company of private equity funds Leonard Green &
`
`
`Partners (“Leonard Green”) and Arsenal Partners (“Arsenal”), proceeded to split
`
`Trifecta in two, gut its sales resources, torpedo its yearslong efforts to land critical
`
`new customers, andsteer its business to a competitor—all in breach ofthe parties’
`
`Membership Interest Purchase Agreement (the “MIPA”). WCG’s fraud and
`
`subsequent breaches of the MIPA robbed Young and several of his Trifecta
`
`employees of more than $60 million in earnout payments—representing
`
`approximately one-third of the total consideration for the transaction contemplated
`
`EFiled: Jul 14 2023 04:29PM EDT
`Transaction ID 70397331
`Case No. 2023-0699-JTL
`
`

`

`by the parties at the timeof the deal. Plaintiffs, through their undersigned attorneys,
`
`bring this Action to remedy WCG’s misconduct.
`
`NATURE OF THE ACTION
`
`2.
`
`Young founded Trifecta in 2005 as the first company to offer a video-
`
`based online training product to better facilitate clinical pharmaceutical trials.
`
`Trifecta’s core product—“InvestigatorSpace”—marriedthree key functionsinto one
`
`integrated solution: training “clinical investigators” and other medical staff who
`
`conductclinicaltrials; tracking safety letters that allow pharmaceutical companies
`
`to ensure patient safety; and simplifying the exchange of regulatory documents in
`
`order to significantly reduce administrative overhead. InvestigatorSpace hadnotrue
`
`competitor in the marketplace, and over the decade anda half that followed, Young
`
`built Trifecta from the ground up into a comprehensive provider of clinical trial
`
`solutions. By 2019, Trifecta had over $25 million in annual revenue, an established
`
`relationship with one of the largest pharmaceutical companies in the world, and
`
`annual growth rates in excess of 16%.
`
`3.
`
`Beginning in early 2020, Young began exploring a sale ofhis company,
`
`ideally to a partner who could help propel Trifecta to new levels of success. After a
`
`brief pause during the early days of the COVID-19 pandemic, the process yielded
`
`three competitive offers all valued above $200 million: an offer frompo
`iim»): an offer
`from WCG; and an offer
`from Pe
`
`

`

`; To gain an edge over the others and induce Youngto sell, WCG
`
`promised Youngthat:
`
`4.
`
`Young took WCGatits word. He accepted WCG’s letter of intent and,
`
`after a period of confirmatory diligence, agreed to sell Trifecta to WGC pursuantto
`
`the MIPA.
`
`5.
`
`The deal closed in November 2020. The consideration Young received
`
`for selling Trifecta fell into three buckets: $125 million in cash at closing, $20
`
`million in WCG equity (vesting over the course of three years), and three potential
`
`annual earnout payments(the “Earnouts”) consisting of every dollar of revenue in
`
`excess of escalating milestones targets in each of 2021, 2022, and 2023 (the
`
`“Revenue Milestones”). Reflecting the ease by which the parties believed the
`
`Revenue Milestones could be achieved, Trifecta’s financial advisor projected that
`
`Trifecta’s continued revenue growth would generate $69 million in total Earnout
`
`payments overthe three years.
`
`

`

`6.
`
`But WCG neverintended to keep the promises that it made to Young.
`
`Atthe time of the acquisition, and completely unbeknownst to Young, WCGandits
`
`private equity sponsors were preparing to cash in on an initial public offering
`
`(“IPO”) that priced WCG at an aggressive premium that could only be achieved if
`
`WCGconvinced the market that it was an innovative technology company with a
`
`fully integrated suite of technology solutions (like Trifecta), rather than the
`
`traditional pharma-services companythat it was. In its prospectus, filed after WCG
`
`acquired Trifecta, WCG claimedthatits productofferings included “software as well
`
`as technology-enabled clinical services that provide integrated, end-to-end support
`
`along the clinical trial process”; that it leveraged “deep data-driven insights to
`
`enhance connectivity and efficiency”; and that its “proprietary clinical technology
`
`applications” included “30 client-facing and purpose-build applications[] integrated
`
`into a single platform.” CG used these claims to cast itself as a high-growth
`technology company that was worth a staggering $6.1 billion, valuing WCG 13
`
`times greater than its revenue and 28 times greater than its EBITDA.
`
`7.
`
`To portray itself as such a company and boostits revenuein the lead up
`
`to the IPO, WCG engagedin serial acquisitions, acquiring dozens of companies
`
`overall, including five in 2020 and 2021. Trifecta was precisely the type of high-
`
`growth, technology-enabled company that WCG neededin its portfolio in order to
`
`justify its aggressive pre-IPO valuation and WCG was therefore strongly
`
`

`

`incentivized to induce Youngto sell Trifecta by whatever means necessary. But, as
`
`quickly became apparentafter the deal closed, WCG had noplansto follow through
`
`on its pre-acquisition commitments because it was focused on the short term—
`
`acquire Trifecta for as little upfront as possible (through the use of earnouts and
`
`delayed equity compensation) and then cash in through the IPO (which ultimately
`
`fell apart because the market refused to pay the premium WCG demanded).
`
`8.
`
`After closing, WCG failed to honor its promises to Young and
`
`systematically sabotaged Trifecta’s ability to meet the Revenue Milestones.
`
`9.
`
`First, in order to prop up its own competing legacy safety product
`
`(“SafetyPortal”), WCG broke Trifecta into two separate business units and forbade
`
`WCG’s existing sales teams from cross-selling Trifecta’s products as an integrated
`
`solution. This splintered Trifecta’s fully integrated solution of safety and training
`
`services and eliminated one of its key competitive advantages. WCG did so despite
`
`promising Young before the acquisition that it would use Trifecta as “the front door”
`
`to further integrate WCG’s owndisparate product offerings and despite promising
`
`the market that WCG’s applications were already “integrated.” In fact, a few months
`
`after breaking Trifecta into two different business units, WCG’s Chief Executive
`
`
`Officer Donald Deieso (“Deieso”’) personally implored Young that he had told the
`
`market that WCG had “one portal” and he needed Young to make that claim
`
`

`

`“honest.” Young and his team created a technical integration, but Deieso never
`
`implementedit.
`
`10.
`
`Second, WCG cannibalized Trifecta’s existing sales team, winnowing
`
`itsPO down toa within 90 days of closing while
`
`refusing to provide Trifecta access to WCG’s sales and marketing professionals.
`
`WCGdid so despite promising Young during negotiations that
`
`The small numberof sales associates from other departments that WCG eventually
`
`did allocate to market Trifecta were given severely inadequate training, including
`
`basic training on Trifecta’s products.
`
`ll.
`
`Third, WCG sabotaged Trifecta’s ability to land new key customers,
`
`ey
`
`a. andee. crippling Trifecta’s revenue growth. For
`
`example, WCG refused to allow Trifecta to submit a proposal for its integrated
`
`solution for safety and training services toa. customerto whomfi
`
`anc instead proposed that WCGbuild an entirely new system from
`
`scratch (that overlapped with InvestigatorSpace). Even after asked to be
`
`provided with a proposal for InvestigatorSpace, WCG’s then-President of Clinical
`
`Services Organization told Young that WCGpreferred to “lose theP| site
`
`6
`
`

`

`portal business than let them use InvestigatorSpace.” In another example, WCG
`
`deliberately steered a different potential customer, a. to one of Trifecta’s
`competitors, UL EduNeering (““UL”)—despite Trifecta having pursued P|
`business for years—by systematically promoting UL toa instead of Trifecta.
`
`Notably, WCG’s then-Chief Executive Officer, Donald Deieso, had long been
`
`associated with UL, having served as its Chairman.and CEO between 2001 and
`
`2007. WOG therefore dino
`
`12.
`
`Fourth, WCG misrepresented SafetyPortal’s ability to achieve a
`
`“guaranteed” $14 million a year in revenue and further misrepresented that
`
`SafetyPortal leveraged advancedartificial intelligence technology. SafetyPortal was
`
`one of WCG’s legacy products, which had competed with Trifecta’s SafetyVigilance
`
`and was included in the Revenue Milestone calculation in order to remedy the
`
`conflict of interest
`
`that would otherwise have existed in post-acquisition
`
`performance. Not only did SafetyPortal fall well short of WCG’s promise of a
`
`“guaranteed” $14 million a year in revenue,ee
`
`

`

`13. WCG’s blatant and immediate about-faces on the promises it made to
`
`Trifecta during negotiations shows that WCG neverintended to keep its promises to
`
`Trifecta in the first place. By April 2021, just six months after closing, Young
`
`implored WCG’s senior executives to provide Trifecta the support it had promised.
`
`Remarkably, WCG’s Vice President of Human Capital conceded to Young and
`
`others that “at WCG,there is always an onboarding period for the founders of newly
`
`acquired WCG companies, to reconcile what they’ve been told versusthe reality of
`
`WCG.” In other words, the WCG that Young was promised—a WCGthat would
`
`support Trifecta throughthe next stage ofits explosive growth—simply didnot exist.
`
`14. When Young confronted WCG’s Chief Executive Officer Donald
`
`Deieso about its campaign to sabotage WCG’s success, Deieso chided Young for
`
`being “greedy,” was told to “shut up” and “stop talking about” the Earnouts, and was
`
`advised to be happy with the compensation he already hadreceived.
`
`15.
`
`To date, WCG has refused to honor its promises and the effects have
`
`been clear. The Revenue Milestones were not met in 2021 and 2022, and WCG
`
`failed to make any Earnout payments. Due to WCG’s misconduct, the Earnout will
`
`also be missed in 2023, depriving Young and Trifecta’s legacy employees—with
`
`whom Young has committed to share a significant portion of the Eamout
`
`payments—oftens of millions of dollars.
`
`

`

`THE PARTIES
`
`16.
`
`Plaintiff Trifecta Multimedia HoldingsInc. is a Delaware corporation
`
`that wholly-ownedall shares of Trifecta Multimedia, LLC before the acquisition.
`
`Prior to its creation in Delaware, Trifecta existed under the same name as a
`
`California limited liability company. Pursuant to the MIPA, WCG purchased 100%
`
`of Trifecta Multimedia Holdings Inc.’s interests in Trifecta Multimedia, LLC on
`
`November 2, 2020.
`
`17.
`
`Plaintiff Dave Young is the founder and former CEO of Trifecta.
`
`Young| ofthe outstanding shares ofcommonstock ofTrifecta Multimedia
`
`HoldingsInc.
`
`18.
`
`Plaintiffs Trifecta Multimedia Holdings Inc. and Dave Young are both
`
`Seller Parties under the MIPA.
`
`19. Defendant WCG Clinical Services LLC is a provider of clinical trial
`
`services. WCGis a Delaware corporation with its principal place of business in
`
`Princeton, New Jersey. WCGClinical Services Inc. is the Buyer under the MIPA.
`
`On December8, 2021, WCG Clinical Services Inc. converted from a corporation to
`
`a limited liability company and changed its name to WCG Clinical Services LLC.
`
`JURISDICTION
`
`20.
`
`This Court has jurisdiction pursuantto 8 Del. C. § 111(a)(2)(iii) because
`
`this civil action seeks to interpret, apply, and enforce the MIPA, which is an
`
`

`

`agreement pursuant
`
`to which a Delaware corporation (Trifecta Multimedia
`
`Holdings,Inc.) agreed to sell its assets (all of its interests in its subsidiary, Trifecta)
`
`and at least one holder of stock in the corporation (Young) consented tothesale.
`
`21.
`
`This Court also hasjurisdiction because the MIPA is “governed by and
`
`construed in accordance with the internal laws of the State of Delaware” andall
`
`parties to the MIPA irrevocably submitted to the jurisdiction of this Court for any
`
`action arising out of the MIPA or any transaction contemplated thereby, MIPA
`
`(Exhibit A hereto), § 8.10.
`
`22.
`
`This Court also has jurisdiction under 10 Del. C.
`
`§ 341 because
`
`Plaintiffs seek equitable relief.
`
`FACTUAL ALLEGATIONS
`
`I.
`
`Young Founds and GrowsTrifecta into the Industry Leading Provider
`of On-Site Clinical Trial Facilitation
`
`23.
`
`Lifesaving new therapies,
`
`including drugs, biologics, and medical
`
`devices, must go through clinical trials to prove that they are safe and effective
`
`before becoming generally available. Unsurprisingly,clinical trials are complex and
`
`heavily regulated. They involve manyplayers, from pharmaceutical companies and
`
`doctors to ethics review boards, government agencies, the “investigators” who
`
`conductthetrials, and thetrial participants themselves. Eachtrial requires immense
`
`coordination, planning, and resources.
`
`In recent decades, pharma-services
`
`companies have emerged to support various aspects ofthis process.
`
`10
`
`

`

`24.
`
`Trifecta is one of those companies. Dave Young founded Trifecta in
`
`2005 to offer video-based online investigator training to clinical trial sponsors and
`
`sites. Perceiving a need for video-based training that could be produced quickly and
`
`inexpensively in the clinical trial setting, Young—whohas a backgroundin theater
`
`and video production—built Trifecta into an integrated suite of products that
`
`provides comprehensive support for physicians and pharmaceutical companies.
`
`25.
`
`In2010, after six years of development, Young secured Trifecta’s first
`
`big break. a. a major pharmaceutical company with a global presence,
`
`entered into a Master Service Agreement (“MSA”) to use Trifecta’s services
`
`pe and became Trifecta’s first “Enterprise Client” Po
`ET 1s «2st20s!0rmatve
`
`for Trifecta and a huge vote of confidence in Trifecta’s ability to support complex,
`
`global clinical trials. By 2014, Trifecta was earning po in annual revenue
`
`froma. by 2019, that figure had grown toa.
`
`26.
`
`In 2012, Trifecta made its first significant acquisition, purchasing
`
`Virtual Clinical Solutions (“VCS”). VCS was a specialist in providing virtual
`
`meetings and on-demandtraining and offered its services to more than 300,000
`
`clinical researchers. The VCS acquisition allowed Trifecta to grow its customer
`
`base and expandits product offerings.
`
`1]
`
`

`

`27.
`
`The key to Trifecta’s early success wasits ability to produce trainings
`
`quickly, and at a low upfront cost, and to deliver those trainings to research sites and
`
`hospitals across the globe reliably. Previously, it took as long as six to eight weeks
`
`to develop each newtraining for a clinical trial, but Trifecta’s video-based approach
`
`allowed Trifecta to develop a new training in just five days and then deliver that
`
`training virtually, anywherein the world. This innovation wasparticularly important
`
`for clinicaltrials in the developing world, which had been significantly under-served
`
`by existing technologies.
`
`28.
`
`Trifecta expanded onthis early success by creating an integrated suite
`
`of products, called InvestigatorSpace,
`
`that had no match in the industry.
`
`InvestigatorSpace had three primary offerings.
`
`The first was “Investigator
`
`Training.” Clinicaltrials are run by clinicaltrial investigators, who are physicians
`
`and must undergo extensive and ongoing training. Trifecta’s Investigator Training
`
`provided a single platform to track that training across both online and in-person
`
`training sessions, ensuring that training credits are efficiently tracked and stored for
`
`regulatory audits.
`
`Investigator Training also dramatically reduced the need for
`
`redundanttraining by (1) tracking training topics across studies so that trainers do
`
`not need to re-train on the same topics; (2) allowing clinicaltrial investigators to
`
`transfer their training to future trials through a process called cross-sponsor mutual
`
`recognition; and (3) allowing investigators to upload proofof training taken through
`
`12
`
`

`

`other third parties.
`
`InvestigatorSpace’s Investigator Training offering thus saved
`
`hundreds of hours of training time pertrial, creating enormousefficiencies: for
`
`example, from 2016 to 2019,trainers at were automatically exempted from
`
`nearly 400,000 redundanttraining topics because they used Investigator Training.
`
`29.
`
` InvestigatorSpace’s second offering was “SafetyVigilance.” Clinical
`
`trial sponsors are required to notify investigators and ethics committees ofall
`
`adverse events. These notifications are called “safety letters,” and they must be
`
`reviewed and acknowledged by investigators and ethics committees. The tracking
`
`and distribution of safety letters creates a huge burdenforclinical trial sponsors and
`
`investigators, especially for large clinical trials,
`
`in part because the regulations
`
`governing safety letters vary by region and by sponsor. Trifecta’s SafetyVigilance
`
`provided a system that was easy to use and administer, while being capable of
`
`supporting
`
`complex
`
`algorithmic-based
`
`solution
`
`for
`
`the
`
`distribution
`
`and
`
`acknowledgment of safety letters unique to each customer, allowing sponsors to
`
`assign safety letters to investigators and track the receipt of letter acknowledgments.
`
`It also generated real-time reports displaying the status of each letter and its
`
`respective acknowledgements for audits and compliance purposes.
`
`30.
`
`InvestigatorSpace’s final offering was the “Regulatory Document
`
`Exchange” (“RDX”’), a user-friendly system for storing and tracking regulatory
`
`documents. To comply with strict regulatory requirements, trial participants are
`
`13
`
`

`

`required to track and maintain large amounts of data and reports. RDX provided a
`
`simple platform for tracking those regulatory documents, significantly reducing
`
`administrative burden.
`
`31. Young grew Trifecta into an industry leader by providing the best
`
`integrated solution on the market. To be sure, Trifecta had competitors, including
`
`TransCelerate (a non-profit industry organization which offers Site Qualification
`
`and Training Solutions), UL (which offers online
`
`safety training),
`
`and
`
`ePharmaSolutions (which offers a clinical trial portal and was acquired by WCGin
`
`2014). But none of these competitors provided the integrated suite of quality
`
`products offered by Trifecta.
`
`32.
`
`Throughout the 2010s, Trifecta continued to expand its customer base,
`
`which led to significant revenue and EBITDA growth. By 2017, Trifecta boasted
`
`$19 million in revenue with $3.8 million in EBITDA.
`
`In 2018, Trifecta increased
`
`its revenue by 15% to $21.9 million and nearly doubled its EBITDAto $6.3 million.
`
`In 2019, Trifecta’s revenue jumped by an additional 16% to $25.4 million, with
`
`EBITDAincreasing to $7.2 million. During this period, Trifecta grew its EBITDA
`
`from 20% to over 25% of revenue.
`
`II. WCG Struggles to Keep Up with the Pace of Innovation Overtaking the
`Industry
`
`33. WCG was created from a 2012 merger of the Western Institutional
`
`Review Board (“WIRB”) and the Copernicus Group Independent Review Board
`
`14
`
`

`

`(“Copernicus Group”). WIRB was founded in 1968 as a for-profit ethics review
`
`board for clinical trials. The Copernicus Group was founded in 1996 as an
`
`independentinstitutional review board. Private equity firm Arsenal Capital Partners
`
`acquired both and then merged them to form WCG.
`
`34. Although it was the amalgamation of two established pharma-services
`
`companies, WCG found itself outmatched by the level of innovation achieved by
`
`emerging competitors like Trifecta. So, in the years following the merger, Arsenal
`
`Capital’s Operating Partner and Co-Headof the Healthcare Group, Donald Deieso
`
`(who became Executive Chairman of WCGin 2012 andits Chief Executive Officer
`
`in 2013) led a string of acquisitions at WCGto try to keep pace with the innovation
`
`happening elsewhere in the industry.
`
`In total, WCG has acquired over 30
`
`companies—an aggressive strategy of innovation-through-acquisition. WCG
`
`repeatedly told the market that its acquired companies would be supported by
`
`WCG’s resources, while retaining critical independence and autonomy.
`
`II. Young Explores a Sale of Trifecta
`
`35.
`
`By 2019, Trifecta’s business was booming, enjoying revenue above
`
`$25 million and growing at more than 16% annually. And the prior year, Trifecta
`
`had successfully negotiated a new po MSA with ee
`SE. ich provicrr
`
`15
`
`

`

`36. With Trifecta firing on all cylinders, Young was ready to consider a
`
`sale of Trifecta to a partner that would enable Trifecta to further accelerate its
`
`growth.
`
`37.
`
`In June 2019, Young metwith investment bankers at Crosstree Capital
`
`Partners (“Crosstree”). Young and the Crosstree bankers had initial discussions
`
`regarding a possible sale of Trifecta and identified a number of potential
`
`counterparties.
`
`38.
`
`Crosstree suggested to Young that he prepare to meet with potential
`
`acquirors at J.P. Morgan’s annual healthcare conference (“JPMorgan Conference”),
`
`which was being held in San Francisco on January 13 and 14, 2020. In preparation
`
`for the conference, Crosstree set up meetings with a mix of potential financial and
`
`strategic sponsors,
`
`including WCG.
`
`Crosstree created a “Clinical Teaser”
`
`presentation for those meetings. The Clinical Teaser projected that Trifecta’s
`
`revenue in 2020 would be approximately $30 million, with EBITDA of
`
`approximately $12 million, and a projected growth rate of over 20%. The Clinical
`
`Teaser laid out Trifecta’s plan for continued growth, the cornerstone of which was
`
`attracting new Enterprise Clients—expanding the tremendous success they had
`
`experienced withi to other major pharmaceutical companies. All but one of
`
`the ten potential acquirors with whom Young and Crosstree met at the JPMorgan
`
`Conference expressed a strong interest in continuing discussions with Trifecta.
`
`16
`
`

`

`39. At this point, Crosstree was planning to market Trifecta through a
`
`traditional competitive bid process.
`
`In preparation for the sale process, Crosstree
`
`began an extensive quality of earnings review to assess and validate Trifecta’s
`
`revenue. Crosstree also began working on a Confidential Information Presentation
`
`to be shownto potential clients after signing non-disclosure agreements. This all
`
`came to a halt, however, on March 4, 2020, when California declared a state of
`
`emergency in response to the emerging COVID-19 pandemic. By March 19, 2020,
`
`California had issued a statewide shelter in place order. Young and Crosstree were
`
`forced to put the potential sale of Trifecta on hold.
`
`40.
`
`COVID-19 created unprecedented challenges for running clinical
`
`trials—including the very trials that would ultimately lead to COVID-19 vaccines
`
`and therapeutics. But because Trifecta’s platform was video-based, it was in a
`
`unique position to support clinical trials under the unprecedented challenges of the
`
`early pandemic.
`
`Indeed, because of stay-at-homerestrictions, the only way to
`
`continueclinical trials was throughthe use ofvirtualtraining platformslike Trifecta.
`
`As a result of this, between March and June 2020, Trifecta added thirteen new
`
`clients—including some large pharmaceutical companies who previously had been
`
`hesitant to work with Trifecta because it was smaller and founder-owned—and
`
`achieved year-to-date revenue growth of 11.4%. Trifecta also provided a significant
`
`17
`
`

`

`amount of services—morethan| freePF to support
`
`its COVID-19 clinicaltrial.
`
`41.
`
`Given the nature of Trifecta’s business, Young and Crosstree were
`
`confident that the increased demand for Trifecta’s products caused in part by the
`
`challenges of COVID-19 would increase Trifecta’s growth potential for years in the
`
`future.
`
`Indeed, Trifecta’s business model creates “sticky” revenue: because .of
`
`Trifecta’s unique system of validating trainings across different studies, a customer
`
`who uses Trifecta for one study is incentivized to continue using Trifecta across
`
`additional studies.
`
`IV. Young Resumes Negotiations with Potential Acquirors in June 2020
`
`42.
`
`In June 2020, following the early pandemic pause,
`
`two potential
`
`acquirorsPe and WCG—reachedout to
`
`Young and Crosstree to restart conversations about a potential acquisition.
`
`43.
`
`To facilitate those discussions, Crosstree prepared a comprehensive
`
`forecast model of Trifecta’s revenue (the “Forecast Model”). Crosstree employed
`
`its standard process to create the Forecast Model, relying on financial information
`
`that had gone through a quality of earnings review. The Forecast Modelrelied on
`
`three primary sources of data to create its revenue projections. First, Crosstree
`
`performed a “backlog burnout” to determine how muchfuture revenue remained in
`
`Trifecta’s then-current contracts. Second, Crosstree estimated the future “pipeline”
`
`18
`
`

`

`(or not yet contracted-for) revenue from existing Trifecta clients. Finally, Crosstree
`
`modelled projected revenue from potential new clients. This final source of future
`
`revenue was determined using a rigorous methodology that identified, for each
`
`potential new project, the probability that Trifecta would successfully acquire the
`
`project and the estimated revenueof the project, among other variables. Based upon
`
`this data, Crosstree assessed a probability-weighted estimated revenue for each
`
`project. Put together, the Forecast Model projected revenue of $39.895 million for
`
`2020, $48.703 million for 2021, $63.503 million for 2022, and $79.979 million for
`
`2023. Based upon these projections, Crosstree assessed Trifecta’s value at over
`
`$200 million.
`
`44, With these projections in hand, Crosstree and Young delivered
`
`presentations to both WCG and a. Crosstree and Young also shared the
`
`Forecast Model. After both companies requested more information regarding the
`
`concentration of Trifecta’s revenue with aa. Crosstree held additional
`
`meetings with each company and presented on Trifecta’s “enterprise opportunities”
`
`pipeline, pursuant to which Trifecta aimed to convert customers from “Early
`
`Adopters” (using Trifecta for one-off studies) to Vendors of Choice (using Trifecta
`
`across multiple studies), to “Enterprise Points” (where Trifecta is the point solution
`
`for all studies), to “Enterprise Full-Stacks” (using multiple Trifecta solutions across
`
`all studies), and finally to “Enterprise Collaborators” (collaborating with Trifecta to
`
`19
`
`

`

`create new services). Converting even one customer from an Early Adopter to an
`
`Enterprise customer could contribute $10-15 million in additional annual revenue
`
`to Trifecta, revenue that would continue for years because Enterprise customers
`
`typically enter into multi-year contracts.
`
`45.
`
` Atthe time, Trifecta had three existing Enterprise customers, including
`
`a. In its presentations toa and WCG,Trifecta identified two additional
`
`Enterprise opportunities, which it referred to as Pharma 1 and Pharma2,that would
`
`result in significant revenue growth. Trifecta projected that Pharma 1 po
`
`could lead to $13 million in recurring annual revenue. Trifecta had provided
`
`P| with free COVID-19 services, and the presentation noted that “as a result
`
`of the positive experience with Trifecta, the Top-20 Pharma companyis exploring a
`
`direct relationship.” Trifecta projected that Pharma 2P| could similarly lead
`
`to $12 million in recurring annual revenue. As withi. Trifecta had assisted
`
`P| with a COVID-19 trial, and the presentation noted that “[t]he Pharma
`
`company is expected to request proposals from a limited selection of vendors (2),
`
`which will include Trifecta, which can provide both certificate and safety letter
`
`solutions.” Securing enterprise relationships with P| or a would
`
`substantially diversify Trifecta’s reliance oni. and Young and Crosstree were
`
`confident that Trifecta had a high chance of securing one or both opportunities if it
`
`continued pursuing them.
`
`20
`
`

`

`Vv.
`
`Young Receives Three Nonbinding Offers for a Potential Acquisition of
`Trifecta
`
`
`
`46. In late August 2020, while negotiations continued with bothF|
`
`and WCG,Crosstree reached out toa. private equity firm with whom
`
`Crosstree and Young had spokenat the JPMorgan Healthcare Conference—to see if
`
`it would be interested in a potential transaction. Crosstree provided po with
`
`Trifecta’s financial projections, and a meeting was subsequently held withi
`
`executives in early September 2020.
`
`47. po andF| both provided indicative offers that valued
`
`Trifecta at overa. in line with Crosstree’s own valuation. WCG’sinitial
`
`offer was lower. WCGoffered to acquire Trifecta for a $120 million upfront cash
`
`payment as well as additional earnout payments that would be madeif Trifecta hit
`
`EBITDAtargets in 2021 and 2022. Crosstree valued WCG’s initial offer, including
`
`the projected earnout payments, at $151,808,500.
`
`48. After evaluating all three offers with Crosstree, Young communicated
`
`to WCGthat its offer was below the twoothers that it had recetved.
`
`In response,
`
`WCGagreed to improveits offer in four critical ways. First, WCG increased the
`
`upfront consideration by $5 million, all ofwhich would be contributed to an existing
`
`equity plan that benefits Trifecta’s employees (the “Phantom Equity Plan”). Second,
`
`WCGadded $20 million in compensation consisting of WCG equity. Third, WCG
`
`agreed to switch the earnout calculation from an EBITDA milestone to a revenue
`
`21
`
`

`

`milestone—a significant change because an EBITDA milestone would have been
`
`easier for WCG to manipulate through accounting decisions that were out of
`
`Trifecta’s control. Fourth, WCG agreed to uncap the earnout, meaning that Young
`
`would receive dollar-for-dollar any amount by which Trifecta’s revenue exceeded
`
`the earnout milestones in 2021, 2022, and 2023.
`
`49. Over the next week,all three. interested parties submitted nonbinding
`
`letters ofintent (“LOT”). P| submitted its LOI on September9, 2020, offering
`
`$160 million, consisting of $118.7 million in cash at closing and a $41.3 million
`
`rollover equity investment in the post-acquisition company.F| submittedits
`
`LOI on September 11, 2020 andoffered
`
`50. WCG submitted its LOI on September 12, 2020. Consistent with its
`
`agreed upon improvements, WCG’s offer included a $125 million cash paymentat
`
`closing, with “an additional $5.0 million ofthe purchaseprice [...] distributed solely
`
`to participants in the” Phantom Equity Plan that benefits Trifecta employees (in
`
`addition to other amounts already going to the Phantom Equity Plan). The offer also
`
`included $20 million of WCG equity, which would vest 25% at closing and 25%
`
`annually for the subsequent three years. Finally,
`
`the offer included earnouts
`
`characterized as amounting to “[u]lp to or exceeding $58.2 million” if Trifecta
`
`22
`
`

`

`achieved revenue greater than $39 million for 2021, $43 million for 2022, and $52
`
`million for 2023. Revenue was to be calculated in accordance with generally
`
`accepted accounting principles (“GAAP”) and consistent with Trifecta’s past
`
`practices. Altogether, WCGvaluedthe offer at “up to or exceeding $203.2 million,
`
`plus any appreciation in the value of WCG equity.”
`
`51.
`
`Crosstree created financial models to compare the value of each ofthe
`
`LOIs and valued each above $200 million.
`
`VI. Relying On WCG’s Promises, Young Accepts Its Offer
`52. Notwithstanding the modeling, Young did not favor P| as an
`
`acquiror becauseit lacked managementexperiencein theclinicaltrial industry.
`
`In
`
`P| Young feared he would not be gaining a “partner”that could help leverage
`
`its industry experience to further grow Trifecta.
`
`53. Having taken the p offer off the table, Young wasleft to
`
`consider the two remaining offers fromF| and WCG. Thep| offer
`pid
`
`23
`
`

`

`54. Despite its lower up-front consideration, Young was willing to consider
`
`a sale to WCG if WCG offered the right fit in terms of resources, support, and
`
`potential for growth.
`
`A 5
`
`5. Young and Crosstree began by reviewing the terms of WCG’s LOI. In
`
`the LOT,WC
`
`RE cco:cing 0 WCC,
`
`
`
`WCGLOI(emphasis added). In the LOI, WCG presented Young with the qualities
`
`he believed could make for a successful acquisition partner: resources, support, and
`
`potential for growth.
`
`24
`
`

`

`56. WCG purported to back up its representations with specific concrete
`
`promises. First, WCG promisedi touting that:
`
`
`
`Id.
`
`57.
`
`Second, WCG pledged access to resources, promising thata
`
`Id.
`
`58. And third, WCG promised access to the market, assuring Trifecta
`
`re
`ae
`
`59.
`
`Based on these promises, along with WCG’s experiencein the industry,
`
`WCG’slong track record of acquisitionsPs
`
`a. and WCG’s agreement
`
`to provide Trifecta’s employees with
`
`contrib

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