Outcome Health makes peace with investors in $159M deal that pushes high-profile founders aside

After months of legal wrangling, accusations and counteraccusations, Outcome Health has settled with its investors.

The point-of-care marketing company was sued in November by its financial backers, including Goldman Sachs Investment Partners and Google parent Alphabet fund CapitalG, who claimed Outcome and its founders had committed fraud by using false information to win over investors and clients.

As part of the settlement, co-founders Rishi Shah and Shradha Agarwal will step aside from day-to-day company management and take on board of director roles as chairman and vice chairman, respectively. Shah had been serving as CEO and Agarwal as president.

RELATED: Outcome Health talks hows and whys of focusing on patient results

The board will expand to add three new independent directors and two investor representatives. Outcome is currently searching for a new CEO.

The lawsuit followed allegations raised in the Wall Street Journal, which reported that Outcome had misled advertisers by overcharging clients and manipulating campaign results. Outcome denied the allegations and said the lawsuit was without cause.

The lawsuit settlement also includes a $159 million investment from “equity investors, lenders and the company’s founders” to reduce the company’s debt and build up its tech platform and operations, Outcome said in a news release.

However, the Wall Street Journal reported on Friday that “all of the money” in the settlement is coming from Shah and Agarwal. The two founders had earlier received a $225 million dividend through an investor capital infusion—a sum that became a point of contention in the investor lawsuit and Outcome’s countersuit. At the time, the investors filed for a temporary restraining order to set aside that $225 million, which was a portion of the $487.5 million raised in Outcome Health's first outside funding round in May. A judge denied the request for a TRO in mid-November.

RELATED: Outcome Health valued at $5.5B with first financing round of $500M

Whether Outcome can move forward as quickly as it rose to prominence remains to be seen. While the company said it was still gaining new clients and adding business even as the lawsuit grabbed headlines, Outcome did lose at least one big-name pharma advertiser, Bristol-Myers Squibb, which did not renew for 2018. Several large ad agencies—including Omnicom Group, Interpublic Group, Havas, and Publicis Groupe—had advised clients to suspend advertising until audits were complete. Those audits are apparently still underway.

Outcome also lost more than one-third of its staff—around 200 out of 535 employees—who took buyouts in late November, according to Crain’s Chicago Business.