The owners of the Mexican funeral services chain Gayosso sued Advent International Corp., claiming the private equity firm fraudulently understated the cost of pre-sold funeral packages when Advent funds offloaded the business to it in 2021 for almost $225 million.
Servicios Funerarios GG SA hired high-profile attorney David Boies, known for successfully challenging California’s ban on same-sex marriage and leading the U.S. government’s prosecution of Microsoft Corp.
The Mexican company claims Gayosso, which it says was managed by Advent, had overstated the profit margin of pre-sold packages by depressing the expenses on caskets, vaults and grave digging to less than 30 percent of the real costs, among other alleged misrepresentations, according to the suit, filed March 29 in Boston federal court.
“Advent fraudulently understated Gayosso’s liabilities to the tune of hundreds of millions of dollars, leaving Servicios Funerarios GG owning a company worth far less than what Advent had represented by way of Gayosso’s financial statements,” the funeral home said in the complaint.
Advent acquired Gayosso in 2007 in a $317 million leveraged buyout. After longer than most private equity turnarounds, it sold the company in 2021 to Servicios Funerarios GG in a deal that involved other parties. Advent received $50 million, according to Mexican court records.
Advent had become “desperate” to sell Gayosso and tried to inflate its value, according to the complaint.
“This entirely meritless lawsuit is just the latest attempt by Servicios Funerarios GG to reopen a two-year old deal that was heavily negotiated,” Advent said in an emailed statement to Bloomberg News. “Advent operates with the highest integrity and we will defend our position vigorously.”
The lawsuit is the latest twist after the January 2021 deal turned acrimonious. Mexican arrest warrants were issued for Advent executives late last year following a criminal fraud complaint made by Servicios Funerarios GG to Mexico City prosecutors, according to court documents.
Servicios Funerarios GG has also claimed Advent hid debt and costs in a local civil suit. Such criminal fraud complaints are a fairly common strategy in Mexico to put pressure on adversaries in civil suits.
Current and former Advent executives have been fighting to quash the arrest warrants in a Mexican court, according to court records.
The dispute has disrupted at least one other Advent deal. Last year, a judge temporarily froze Mexican assets held by Advent funds, derailing the firm’s sale of Grupo Farmaceutico Somar SAPI to Colombia’s Procaps Group SA. Due to the uncertainty over when it could complete the acquisition, Procaps said in January it had terminated the agreement, though it remained open to reaching a new deal with Advent.
The case is Servicios Funerarios GG, S.A. de C.V. v. Advent International Corporation, 23-cv-10684, US District Court, District of Massachusetts (Boston)
