While there’s no formal agreement in place, and ongoing discussions may not lead to a definitive deal, a complete exit for present shareholders is not being ruled out.
TPG has had several rounds of discussions with the company and is keen to get on board, but the specifics of the deal are yet to be firmed up, a source said. “TPG and Mu Sigma are trying to explore if a deal is workable. The discussions have been substantial but contours of the transaction are yet to evolve,” one of the sources cited earlier in the report said. Currently, TPG and Mu Sigma are holding talks directly without engaging any investment banks.
Text messages and emails sent to Mu Sigma’s Rajaram by TOI went unanswered. TPG cited the firm’s policy of not commenting on market speculation.
Over the last year, Mu Sigma has been able to shore up its revenues, which had been severely hit in 2016 on the back of Dhiraj Rajaram’s divorce from his wife, Ambiga Subramanian, who was then the company CEO. The split between the two resulted in a restructuring of the data analytics company, which involved Subramaniam exiting the firm by selling her stake for $170 million. Both Rajaram and Subramanian held 24% each in Mu Sigma.
The complex share buyback executed by Rajaram a year ago saw him purchase Subramanian’s stake along with that of Mastercard’s, which sold its entire holding. Other investors like General Atlantic and Sequoia Capital, partially sold their shares. Mu Sigma was reported to have been valued at $900 million at the time of the share buyback. After the transaction, Rajaram now holds about 52% stake in the company, giving him firm control.
Rajaram, an alumnus of the University of Chicago and College of Engineering in Guindy, Chennai, founded Mu Sigma in 2004, after working for consulting firm Booz Allen Hamilton.
Big data companies have faced growth headwinds in the recent past and achieving scale has been a challenge for many of them. A buyout investor like TPG could spur the growth of Mu Sigma as it could gain access to the former’s portfolio companies globally. Existing financial investors General Atlantic and Sequoia are keen on an exit but would wait for Rajaram to trigger any deal, if it happens.
In 2013, a small fund infusion by Mastercard had valued Mu Sigma at $1.5 billion, giving it almost 14 times multiple on revenue. But valuation multiples have sobered because of its internal woes, exit of Subramanian and a string of top executives, who left subsequently. However, in an interview to business daily, Mint, in September last year, Rajaram, said that Mu Sigma’s revenue, which had declined in 2016 after years of growth, was expected to exceed $180 million in 2017.