PartnerOne, a Canadian private equity firm, acquired HeadSpin, a mobile app testing startup, for $28.2 million in a recent fire sale, as reported by TechCrunch. This acquisition comes after the founder of HeadSpin was sentenced for fraud earlier this year.
According to documents reviewed by TechCrunch, HeadSpin generated $21 million in revenue in 2023 and $5 million in Q1 2024. PartnerOne valued HeadSpin at approximately 1.4 times its revenue, slightly below the median M&A transaction multiple for deals in Q1 2024, which was 1.6 times revenue, as per PitchBook data.
While PartnerOne declined to comment on the purchase price and HeadSpin’s revenue, it was revealed that in 2020, the company’s board, including Palo Alto Networks CEO Nikesh Arora, discovered revenue overstatements by the founder, Manish Lachwani, leading to his resignation.
Subsequently, Lachwani pleaded guilty to fraud charges, resulting in a prison sentence and restitution. Despite this setback, HeadSpin had previously raised $117 million from prominent investors.
Following the scandal, HeadSpin’s valuation plummeted from $1.1 billion to $302 million, and the company struggled to secure additional financing, ultimately leading to its acquisition by PartnerOne.
After the acquisition, HeadSpin’s new leadership team departed, while former employees reportedly received no compensation for their stock options. PartnerOne’s CFO stated that the departing executives were generously compensated as part of the transaction.
