SHOCKING DEAL ROCKS TECH INDUSTRY: PE FIRM BUYS FRAUD-HIT STARTUP FOR PENNIES ON THE DOLLAR
In a jaw-dropping move that raises serious questions about the integrity of Silicon Valley’s startup ecosystem, Canadian private equity firm PartnerOne has acquired mobile app testing startup HeadSpin for a whopping $28.2 million – despite its founder being sentenced to prison for fraud earlier this year.
The fire sale was facilitated by HeadSpin’s desperate attempts to stay afloat after its founder, Manish Lachwani, was accused of overstating the company’s revenue by nearly four times. Lachwani’s fraud was exposed in 2020, leading to his resignation and subsequent criminal charges, including two counts of wire fraud and one count of securities fraud.
But that didn’t stop PartnerOne from swooping in and buying the company for a mere fraction of its former valuation. In fact, the PE firm valued HeadSpin at a paltry 1.4 times revenue, a far cry from the median M&A transaction multiple of 1.6 times for deals announced or closed in Q1 2024.
Meanwhile, HeadSpin’s new CEO, COO, and CTO all walked away with "generous packages" as part of the transaction, while most former employees were left with nothing for their stock options – vested or unvested.
The whole ordeal raises serious questions about the ethics of PartnerOne and its willingness to put profits over people. Did they really think they could turn a blind eye to the fraud allegations and still make a profit? The tech industry is already reeling from a series of high-profile scandals – and this deal only adds fuel to the fire.
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