Delaware court allows disclosure claim in Focus Financial buyout lawsuit to proceed

A Delaware judge has allowed a shareholder lawsuit challenging the $7 billion take-private acquisition of Focus Financial Partners Inc. to proceed to limited discovery, preserving a key disclosure claim despite dismissing allegations that the company’s long-time private equity backer acted as a controlling stockholder.

The suit, filed by Anchorage Police & Fire Retirement System and Teamsters Union No. 142 Pension Fund, targets the 2023 transaction in which Focus Financial was acquired by private equity firm Clayton, Dubilier & Rice (CD&R) for $53 per share in cash. The plaintiffs claim the sale process unfairly favored CD&R and failed to disclose material information about a competing bid from Wealth Enhancement Group (WEG), an RIA consolidator that had submitted a higher all-cash offer.

The complaint also alleged that Stone Point Capital, a private equity firm with a 20.6 percent stake in Focus, operated as a controlling stockholder and steered the board toward a deal that preserved its own interests. Stone Point held the right to designate directors and stood to retain a post-closing equity position alongside CD&R. According to plaintiffs, Stone Point’s influence, along with executive incentives tied to tax receivable agreements (TRAs), resulted in a process that excluded WEG from meaningful consideration.

But in a 72-page opinion issued on April 3, 2025, Chancellor Kathaleen St. J. McCormick of the Delaware Court of Chancery dismissed the bulk of the claims. The court found that plaintiffs failed to adequately plead that Stone Point exercised actual control over Focus or that it formed a control group with Focus insiders. Nor did the court find sufficient reason to apply the stringent “entire fairness” standard, ruling instead that the business judgment rule applied, due to the transaction having been approved by a fully informed, uncoerced vote of disinterested stockholders.

However, the court declined to dismiss one claim related to proxy disclosure. According to the complaint, Focus CEO Rudy Adolf failed to promptly inform the board about WEG’s unsolicited offer and did not direct the company’s bankers to engage meaningfully with the rival bidder. Goldman Sachs, acting as financial advisor, allegedly mischaracterized WEG as non-credible and withheld information about WEG’s outreach and capacity to bid.

The court ruled that these allegations, if true, could support a claim that the proxy statement was materially misleading, particularly in its description of the sale process and board deliberations. McCormick wrote that a “reasonable stockholder could view the omission of this information as material in deciding how to vote.”

Rather than proceed with a full trial, the court converted the defendants’ motions to dismiss into motions for summary judgment on this single disclosure issue and ordered limited discovery focused on how WEG’s offer was handled. All other claims, including those for aiding and abetting against CD&R and Goldman Sachs, were dismissed without prejudice and stayed pending the outcome of the remaining claim.

The ruling narrows the scope of the litigation but puts a spotlight on the treatment of strategic bidders in RIA M&A processes, particularly where incumbent investors or executives may have financial incentives tied to specific deal outcomes.

Focus Financial, which had gone public in 2018, became one of the most prominent aggregator platforms in the independent wealth management space. Its sale to CD&R was widely viewed as a bet on continued roll-up opportunities and value creation through scale. But for shareholders who felt excluded from the upside, the litigation offers a rare window into the inner workings of a high-profile take-private deal—and how courts assess the integrity of the process behind it.

The case remains ongoing as the parties proceed with discovery on the disclosure-related claims.