WPP sues over its acquisition of Walmart's former agency, and the suit shows the retailer's early advertising struggles

• Ad holding company giant WPP sued two private equity firms and former executives at agency Triad Retail Media, which WPP acquired in 2016 for $300 million.
• WPP alleges the firms knowingly inflated the value of Triad, which provides digital and in-store ads for major retailers, by about 40%, costing WPP around $120 million of its investment.
• In the suit, Triad's CFO allegedly described its Walmart business as in "a bit of a free fall."
• Walmart is among retailers that are trying to take on Amazon in online advertising.
• All groups involved in the suit either declined to comment or did not respond to related requests.
• Click here for more BI Prime stories.

Ad holding company giant WPP sued two private equity firms over its 2016 acquisition of Triad Retail Media, a Florida-based agency that sells ads via the digital and in-store properties of major retailers like CVS, Sam's Club, Wayfair, and, formerly, Walmart.

Bloomberg first reported the suit, which alleges that RB/TDM Investors and Falcon Investments, the private equity firms that owned Triad when it was sold, along with the agency's founder and then-CEO, inflated Triad's value by more than 40% and caused WPP to lose $120 million of its $300 million investment.

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The filing, which arrives as Walmart aggressively moves to compete with Amazon's advertising business, also quotes a Triad executive describing the Walmart account as being in "a bit of a free fall."

WPP demands a jury trial and $40 million in damages plus prejudgement interest at a 9% annual rate. The full document, filed November 15 in New York State Supreme Court, is embedded at the bottom of this story.

Agency principals and private equity firms allegedly slashed revenue estimates without WPP's knowledge

In the complaint, WPP alleges that Triad's estimated EBITDA (earnings before interest, depreciation, and amortization) for 2016 would be $13.3 million, not $31.6 million, as Triad initially told WPP. These figures were driven primarily by Walmart's business.

According to the suit, Triad reduced the estimated net ad revenue that Walmart would receive from Triad in 2016 from $200 million to $150 million without WPP's knowledge.

The complaint alleges the defendants knew the numbers they presented to Walmart - and, by extension, Triad's figures - were false, but signed off on them anyway. 

A Triad representative referred to WPP, which declined to comment on the suit. Falcon Investments declined to comment, and RB/TDM Investors did not respond to emails seeking comment. A Walmart spokesperson did not immediately respond to an email seeking comment on this story.

Internal communications said the Walmart account was in 'free fall' in late 2016

The filing cited an online chat in which Triad's CFO allegedly responded to a question about the deteriorating revenues on Walmart's account by saying the business was in "a bit of a free fall."

"Triad was asked by Walmart to hold its forecast at $185 million rather than reducing it even further" in the days leading up to the deal, the suit alleges. 

The filing also quotes an internal email by Triad's CFO three business days after the deal closed saying that the agency's actual 2016 revenue would "likely be worse than" the estimates.

According to the suit, Triad's revenues never recovered. AdAge reported in February that Walmart would take digital ad sales and analytics work previously handled by Triad in-house.

Walmart continues to drill into its ad business. Business Insider first reported this month that Walmart will soon roll out its own self-serve advertising tools.

Triad laid off staff earlier this year

On September 26, the Tampa Bay Times reported that Triad laid off an unspecified number of employees. No reason was given for the layoffs.

Several months earlier, The Wall Street Journal reported that Walmart rival Target initiated talks to acquire Triad.

The three former Triad executives named as defendants in the filing either did not respond to LinkedIn requests and emails or could not be reached for comment.

Triad currently employs more than 600 people across four offices in Florida, New York, Illinois, and Arkansas, according to LinkedIn.