Legal Actions Temporarily Halt Merger Between DealerSocket and Auto/Mate

DealerSocket, an automotive software provider, announced earlier this month its plans to purchase competitor, Auto/Mate, however the merger has been temporarily blocked over a claim that the deal is a fraudulent scheme.

Brad Perry, co-founder of DealerSocket, filed a suit asserting that the transaction is designed to “mask losses” at private equity group, Vista Equity. Allegedly, the merger benefits private equity insiders while “wiping out” minority shareholders, such as Perry.

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.”

In addition to filing a suit, Perry sought a restraining order to temporarily block the deal. The request was approved by a judge in a Delaware Chancery Court, reports Bloomberg Law.

CEO of DealerSocket, Sejal Pietrzak, responded to the accusations in an email to Automotive News. The communication read:

“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.”

Automotive News says DealerSocket did not comment any further regarding the lawsuit. Though the company did indicate it plans a “vigorous defense”.