Thoma Bravo, a private equity and capital growth firm, today announced that it will spend C$1.8 billion (~$1.34 billion) to acquire Magnet Forensics, a Waterloo-based company that makes software used by the defense forces and enterprises to investigate cybersecurity threats.
Magnet Forensics will be bought by Thoma Bravo’s newly formed corporation, Morpheus Purchaser Inc., which will pay Magnet Forensics shareholders a 15% premium over Thursday’s closing price on the Toronto Stock Exchange. After the purchase, Morpheus will be merged with Grayshift’s mobile forensics division, of which Thoma Bravo acquired a majority stake last July.
The transaction is expected to close by the second quarter of 2023, subject to approval by shareholders and other ordinary people.
“We look forward to combining the additional capabilities of Magnet and Grayshift to create a leader in digital forensics and cybersecurity,” Thoma Bravo partner Hudson Smith said in a press release. “Digital evidence is an increasingly important aspect of investigations and the combined company will be well positioned to further expand the market, accelerate innovation and deliver even better solutions to its customers.”
Magnet Forensics, launched in 2010, develops digital investigative software that collects, analyzes, reports and manages evidence from computers, mobile devices, IoT devices and cloud services. The company was founded by Jad Saliba, a Waterloo Regional Police constable who worked in the police’s High Tech Crime Unit. After incubating Magnet Forensics software within the division, Saliba decided to go his own way and sell the technology for a license fee, partnering with Jim Balsillie and Adam Belsher, then BlackBerry executives.
Prior to going public, Magnet Forensics raised funding from In-Q-Tel, the non-profit venture capital arm of the US intelligence community. The company claims that its software is used by more than 4,000 public and private sector customers, such as police, intelligence agencies, tax authorities, border guards and the military, in more than 100 countries, helping investigators protect assets and safeguard national security.
Prior to the acquisition, the business was booming (although Thoma Bravo first submitted an offer in early October last year). During its Q3 2022 earnings report, Magnet Forensics reported that annual recurring income increased 50% year-over-year to $80.9 million, with EBITDA being earnings before interest, taxes, depreciation and amortization. — increased by 25% to $5.9 million.
According to a recent report from Imarc, Magnet has benefited from the expansion of the digital forensics market, which is expected to grow from $5.8 billion in 2022 to $10.9 billion in 2028.
Adam Belsher, CEO of Grayshift, says the combination of Grayshift’s mobile access and data extraction capabilities and Magnet’s digital investigation suite will strengthen the combined companies’ position by enabling customers to better extract, process, explore, collaborate and manage digital evidence.
“We believe the combination of Magnet and Grayshift will unlock tremendous value for our customers by further integrating and expanding our suite of products, leading to smoother workflows in the recovery and analysis of critical digital evidence for investigative purposes, and ultimately our common mission. striving for justice,” Belshere said in a statement. “We look forward to partnering with Thoma Bravo and Grayshift to leverage our digital investigation suite to further innovate and continue serving a growing number of organizations and use cases.”
For Thoma Bravo, which currently manages over $114 billion in assets, Magnet Forensics is the latest in a series of high-profile software venture purchases. In 2022, the firm spent billions of dollars buying cybersecurity startups Ping Identity, Sailpoint, ForgeRock, Bottomline Technologies and Coupa Software.