Private Equity Firm PartnerOne Acquires HeadSpin for $28 Million, Far Below Its Previous $1.1 Billion Valuation by ICONIQ and Dell Technologies Capital

In a significant deal, PartnerOne, a Canadian private equity firm, acquired HeadSpin, a startup specializing in mobile app testing, for $28.2 million. This acquisition comes after HeadSpin’s founder was convicted of fraud earlier in the year, as per documents reviewed by TechCrunch. The transaction was characterized as a fire sale by TechCrunch previously.

Financial documents indicate that HeadSpin reported revenues of $21 million in 2023 and $5 million for the first quarter of 2024. This suggests that PartnerOne’s investment values HeadSpin at roughly 1.4 times its revenue. Comparatively, the average merger and acquisition (M&A) deal multiple for the first quarter of 2024 is 1.6 times revenue, based on data from PitchBook.

Requests for comments on the acquisition cost and HeadSpin’s revenue were not addressed by PartnerOne.

In 2020, after discovering the company’s revenue had been overstated by almost fourfold by its founder Manish Lachwani, HeadSpin’s board, which included Nikesh Arora of Palo Alto Networks, pressured him into resignation, detailed in various reports. Arora stepped down from the board in January.

Lachwani admitted to two charges of wire fraud and one charge of securities fraud in April, receiving a sentence of 18 months in prison and being mandated to make restitution payments.

Before the fraud charges, the startup had successfully raised $117 million from notable investors like Google Ventures and ICONIQ Capital, among others. Despite these challenges and a significant valuation cut from $1.1 billion to $302 million, HeadSpin continued operations under new leadership, as per an article in The New York Times.

Despite efforts to secure new funding in late 2022, HeadSpin faced difficulties attracting investment, leading to a $11.4 million convertible note from current investors. Subsequent funding efforts failed, leading to the engagement of Shea & Company for the sale of the business.

Following the acquisition, PartnerOne announced that HeadSpin’s leadership, including the CEO, COO, and CTO, exited the company, receiving substantial exit packages, according to a statement from PartnerOne CFO Jonathan Dionne to TechCrunch. Yet, many former employees found their stock options, whether vested or not, to be worthless, as reported by TechCrunch.