Canadian private equity firm PartnerOne has acquired mobile app testing startup HeadSpin, whose founder was convicted of fraud earlier this year, for $28.2 million, according to documents seen by TechCrunch. The fire sale was reported by TechCrunch last week.
According to the filing, HeadSpin had revenue of $21 million in 2023 and $5 million in Q1 2024. That means PartnerOne valued HeadSpin at about 1.4x revenue. The median M&A deal multiple for deals announced or closed in Q1 2024 was 1.6x, according to an analysis of PitchBook data.
PartnerOne declined to comment on the purchase price or HeadSpin's revenue.
In 2020, HeadSpin's board, which included Palo Alto Networks CEO Nikesh Arora, reportedly urged founder Manish Lakhwani to resign after learning that he had inflated the company's revenue by nearly four times. Arora resigned from the board in January.
Rachwani pleaded guilty in April to two counts of wire fraud and one count of securities fraud, was sentenced to 18 months in prison and ordered to pay restitution.
Prior to the fraud allegations, the company had raised $117 million from investors including Google Ventures, ICONIQ Capital, Dell Technologies Ventures, Battery Ventures, Felicis and Tiger Global.
The company continued to operate under new management, but its valuation was subsequently cut by about two-thirds to $302 million from the $1.1 billion set in its Series C round in February 2020, The New York Times reported.
HeadSpin attempted to raise new equity or debt from outside investors in late 2022 but was unable to attract new backers, according to the documents. The company ultimately raised $11.4 million in convertible notes from existing investors. HeadSpin's failed attempts to raise more capital forced it to retain investment banker Shea & Co. to help sell the business.
PartnerOne told TechCrunch in a statement last week that HeadSpin's new CEO, COO and CTO all left the company following the acquisition. “They all received very generous packages as part of the acquisition,” PartnerOne CFO Jonathan Dione said in a statement.
However, TechCrunch previously reported that most of the former employees received nothing for their stock options, both vested and unvested.