British startup Infogrid, which had a successful pandemic period helping the U.K.’s National Health Service with vaccine tracking and maintenance automation, was aiming for significant growth. Backed by investors like SoftBank’s Vision Fund and Spotify backers Northzone, the company’s CEO William Cowell de Gruchy had plans to expand to the U.S. through the acquisition of American rival Aquicore, known for their energy efficiency solutions in commercial buildings. However, a lawsuit filed by Aquicore investor K Street Capital claimed that Infogrid had misrepresented its revenues and was unable to finance the $43 million takeover, putting the deal in jeopardy.
The lawsuit alleges that Infogrid’s true revenues were significantly lower than what had been promised by Cowell de Gruchy, and the business was actually smaller than Aquicore. K Street Capital claims that Infogrid provided false and misleading information about its performance, leading Aquicore to enter into exclusive negotiations with inaccurate data. Infogrid has yet to file a defense against these claims, but has stated that they plan to contest the lawsuit. The suit involves K Street Capital, managed by Paige Soya, against Cleve Adams, Infogrid, and other AquaCore investors involved in the takeover.
Infogrid raised a reported $90 million in a Series B equity and debt round in April 2023, after laying off around 80 staff earlier in the year. The majority of this funding came from swapping already issued convertible loan notes rather than new capital. Cowell de Gruchy claimed that Infogrid had experienced significant growth in 2022, but did not disclose specific revenue figures. However, K Street Capital claims that after the merger closed, it was revealed that Infogrid had generated only $15.1 million in revenue in 2022, significantly less than the $55.8 million initially claimed during takeover talks.
Infogrid was projected to reach $261 million in revenue in 2023, but Cowell de Gruchy later told investors that the business had only made $15 million the previous year. This shortfall was noted by K Street Capital in their complaint, highlighting the stark difference between Infogrid’s projections and actual performance. Cowell de Gruchy resigned as CEO of Infogrid in 2023 and stepped down as a director in February 2024, as reported in U.K. corporate filings. The lawsuit also alleges that Aquicore CEO Adams pushed for the deal with Infogrid, despite knowing that the company’s revenues were inflated, in order to receive substantial bonuses upon deal closure.
The contentious lawsuit between K Street Capital and Infogrid sheds light on the challenges and potential pitfalls of high-stakes acquisitions in the tech industry. Infogrid’s failed takeover of Aquicore raises questions about the accuracy of financial information provided during negotiations, as well as the responsibilities of CEOs and investors in ensuring transparency and due diligence. As the legal battle unfolds, the outcome will likely have implications for both companies involved, as well as other startups navigating similar growth and expansion strategies in the competitive global tech market. Cowell de Gruchy’s departure from Infogrid adds another layer of complexity to the situation, leaving investors and industry observers to wonder about the company’s future leadership and direction.
