Private equity giant Carlyle Group is on the verge of acquiring a substantial stake, exceeding 20%, in the engineering services provider Quest Global Services Pte Ltd, according to two people with knowledge of the deal. As part of this transaction, Quest’s promoter, Ajit Prabhu, is also set to bolster his existing holdings.
Carlyle’s pursuit of a stake in Quest has solidified following the collapse of negotiations with the previous front runner, Apax Partners. The deal with Apax fell through due to a disparity in valuation. Initially, Apax had been vying to secure as much as a 40% stake in the company, as reported by Mint on 15 January.
In the new deal structure proposed, Quest Global Services is raising $200 million debt that will buyback some shareholders and extinguish some shares. The resulting transaction will see Ajit Prabhu hike his stake in the business to around 44%, one of the people cited above added.
The other co-founder Aravind Melligeri will reduce his stake in the transaction which is expected to provide a full exit to existing private equity shareholders Advent International and Bain Capital.
Bloomberg first reported on 16 May that Carlyle and Prabhu were in talks to acquire a $640 million stake that would value Quest Global Services at $1.8 billion.
This would indicate a flat round as in the last equity transaction struck in August 2021, Chrys Capital and True North acquired an 8.33% stake in Quest which valued the business at around $1.8 billion, according to VCCEdge.
Chrys Capital and True North are not selling shares in this transaction.
Quest Global Services was founded by Prabhu and Melligeri in Bengaluru in 1997, though it shifted headquarters to Singapore later.
In 2016, Advent, Bain and Singapore’s sovereign fund GIC paid around $350 million (then ₹2,500 crore) to acquire shares in Quest from Warburg Pincus and other small investors.
Spokespeople for Carlyle, Advent International, and Bain Capital declined to comment.
Quest Global chief executive officer Prabhu and Quest Global Services did not respond to requests for comment for this report.
Earlier in January, Prabhu said Quest Global was “playing for the long haul” to a query on the company bringing on board new shareholders.
“Quest Global has been built to solve some of the hardest engineering problems the world faces today by redefining the meaning of customer focus for the industry. All industries are on the cusp of technological disruption driven by engineers. With a 100% focus on engineering and a multidisciplinary workforce, Quest Global is in a unique position to scale. This simple concept remains our driving force and shall not change,” Prabhu said in an email response on 16 January.
