Apax, TA, Carlyle shortlisted for likely $1bn Quest Global deal

Apax Partners, TA Associates and the Carlyle are the three private equity contenders shortlisted after an initial screening of non-binding bids to acquire a significant minority stake in Singapore-based engineering outsourcing firm Quest Global , people aware of the development told. The deal value could be in the vicinity of $1bn.

One more global private equity fund might also make the cut as existing investors Advent International and Bain Capital, which together own around 33% of the company, are looking to monetise their five-year-old investment. Singapore’s investment firm GIC, which owns a small 2-3% stake in the company, may also sell its stake, the sources mentioned above said.

There will also be primary capital infusion into the company.

The contenders were shortlisted late last week and through the weekend after several contenders, including sovereign fund ADIA and TPG, also submitted their offers. The detailed diligence process is expected to begin shortly.

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Quest was founded by former General Electric Co engineer Ajit Prabhu and Aravind Melligeri in 1997. It considers Pratt &Whitney, Rolls Royce, BMW, Airbus and GE among its past and current clients. Prabhu remains the largest and controlling shareholder with close to 50% stake in the company.

The sellers expect a $3-billion valuation but the business, having lost some key clients such as Apple and Rolls Royce, might see a deal at a $2.3-2.5 billion valuation, meaning a $800-1 billion potential investment for the up to 40% stake on offer. In FY23, the company is expected to post $700 million revenue and a $125-130 million EBITDA, or operating profit.

By the end of FY22, the company witnessed almost 50% growth in the engineering team for the medical devices vertical alone, making it confident of reaching $1 billion in revenue by 2025.

Investment banks JPMorgan and Barclays are advising the investors. ET was the first to report on August 23 that the PE investors were seeking an exit via a formal auction process.

“Investments by private equity firms are an integral part of our overall growth strategy and are part of the normal course of business,” said the company spokesperson. “Investments and exits by private equity firms fluctuate and are prudently planned.”

Quest has made 14 acquisitions in the past 25 years and continues to look for inorganic growth opportunities, especially in adjacent businesses. It had a manufacturing arm that was hived off early on, in order to focus on tech services.

Mails sent to TA Associates, Apax Partners and Carlyle remained unanswered.

Source: Business Telegraph

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