A co-founder of DealerSocket Inc., a software provider for auto dealers, filed a lawsuit against the company’s board challenging the company’s agreement to acquire Auto/Mate.
DealerSocket Co-Founder Brad Perry contends in the suit that some members of the board of directors and the CEO, Sejal Pietrzak, conspired with majority shareholder Vista Equity Partners to force the deal, which would “wipe out” minority shareholders.
Perry also sought a temporary restraining order to block the planned acquisition with Auto/Mate, another auto dealer software provider, Bloomberg Law reported.
The complaint, filed in Delaware Chancery Court on Tuesday, claims directors affiliated with Vista — which invested in DealerSocket in 2014 — engineered the deal in a “months-long fraud” to create “artificial valuations of DealerSocket so as to mask losses in” a Vista investment fund.
The scheme “included (and continues to include) lies, secrets, value manipulation, minority-shareholder oppression, bullying and cover-ups,” the complaint said. It was “designed to wipe out the minority shareholders to enrich itself.”
Vista “forced” an approval of the acquisition by adding “more board members than permitted,” the complaint said, to DealerSocket’s board. Perry is a member of the board.
Directors representing Vista’s interests negotiated the Auto/Mate deal in secret, which called for $263.3 million in equity for DealerSocket, diluting minority shareholders “in favor of Vista,” the complaint said.
In an emailed response to Automotive News, Pietrzak said:
“DealerSocket and Auto/Mate are both grounded in excellent service and strong technology, and are committed to supporting dealerships to help them better serve their customers and grow their businesses. Combining these two solutions provides a strategic win for DealerSocket, Auto/Mate and dealers, as well as a new integrated solution to the market.”
The company did not comment further about the suit, but signaled it plans a vigorous defense.
A month before the current suit was filed, another board member named Jonathan Ord filed a records suit against Vista, claiming it “loaded” DealerSocket with debt, causing the software company to lose 94 percent of its value, Bloomberg Law reported.
Perry and Ord were told by the “Vista interested” directors that they were “passing on the acquisition,” according to the recently filed complaint.
DealerSocket announced the Auto/Mate acquisition in a press release on Jan. 6.
Perry requested a copy of the transaction document on Jan. 10 and was refused, the complaint said. “Only after threat of litigation Perry received the transaction document,” on Jan. 12, the suit contends.