By Liz Hoffman
Goldman Sachs Group Inc. and Vista Equity Partners have agreed to settle a closely watched lawsuit brought by investors in a software company that went private in a roughly $4 billion buyout two years ago.
The firms will pay about $30 million to former investors in Tibco Software Inc., whose sale to Vista was marred by a share-count error that lowered the price and deprived shareholders of $100 million, according to people familiar with the matter.
A letter filed Thursday with the Delaware Court of Chancery said the parties had reached an agreement without disclosing the terms.
It wasn't immediately clear how the amount of the payment would be split between Vista and Goldman, which advised Tibco on the deal. The Wall Street Journal earlier Thursday reported on the terms of the settlement.
The Tibco case is among a number of recent lawsuits targeting merger bankers for their advice.
While plaintiffs' lawyers have long sued companies and their directors, claiming some deals are unfair, they are increasingly going after financial advisers, which make hefty fees for their work on takeovers.
Since 2014, about two dozen such cases have been filed, alleging conflicts of interest that skewed bankers' advice or errors that shortchanged investors.
The increase of Tibco-like lawsuits is shaking up the market for merger advice. Big banks are becoming more selective about which assignments to take, wary of conflicts or of finding themselves locked out of business or of offending clients.
And boards are sending a record amount of work to so-called boutiques, smaller advisory shops that pitch themselves as less conflicted because they lack the sprawling businesses of many Wall Street firms. Some at larger banks argue with that characterization and say that boutiques have conflicts of their own.
That this lawsuit involved Goldman Sachs, the leading merger-advisory shop on Wall Street, added to the level of interest it generated among lawyers and bankers. Goldman, which was paid a fee of $47 million for advising Tibco, has defended its work on the deal.
Vista had agreed to pay $24 a share for Tibco, valuing the software company at $4.1 billion. But after the agreement was reached, Tibco told its investors that Vista may have relied on an overstated share count and intended to pay $4.2 billion.
The error came from a spreadsheet distributed by Goldman bankers that double-counted some shares that were given to executives as compensation.
The shareholders sued, alleging that Goldman didn't tell Tibco once it realized Vista's bid was underpriced, and in failing to do so tied the board's hands at a critical moment.
Directors have a legal duty to get the best price they can for investors.
Goldman in court blamed Tibco for providing inaccurate figures and said it promptly called lawyers for Tibco's board when it realized the error. In court filings, Goldman produced handwritten notes from a lawyer at Ropes & Gray LLP who was on that phone call that appear to confirm the bank's version of events.
The parties were close to a settlement last fall, under which Vista would have paid about $35 million and recovered some of that from the bank, The Wall Street Journal reported in December. The talks fell apart.
Vista was founded in 2000 by a former Goldman banker. The private-equity firm, known for midsize technology buyouts, has often hired Goldman for advice and financing on its deals.
Write to Liz Hoffman at email@example.com