WATERLOO REGION — The record-breaking sale of Magnet Forensics for $1.8 billion reinforces the region’s growing reputation as a world-class center for cybersecurity expertise, says Randall Howard, a veteran technology entrepreneur and investor.
“It is three to four times larger than any tech acquisition we have had before, so No. 1, it is huge. No. 2, the company is 11 years old, it is a relative baby in terms of building that much value,” said Howard.
Last Friday, Magnet Forensics announced the proposed sale to American private equity company Thoma Bravo. Shareholders must approve the sale, and there is a 60-day blackout on media interviews while both sides work to close the deal.
To put the Magnet deal in perspective, the next-largest acquisition in the region’s history was in 2017 when Sandvine was sold to Francisco Partners and Procera Networks Inc. for $562 million.
Fast forward to today: hospitals, school boards and pipelines are routinely attacked by criminal hackers. The value of the proposed sale of Magnet Forensics reflects the escalating importance of deploying the best technology in digital investigations, said Howard.
“There are a lot of bad guys in the digital world,” said Howard. “The fact that this space is escalating means it is an arms race with the bad guys.”
Magnet Forensics was founded by Jad Saliba in 2010. He is a former Waterloo Regional Police officer who was working a desk job following cancer treatment when he wrote a program to recover data from computer hard drives.
In 2011, Adam Belsher was brought on as chief executive officer. Belsher was a former vice-president at BlackBerry in charge of the Verizon Business Group, the largest business group at the Waterloo-based smartphone company.
By December 2012, Magnet Forensics had graduated from the Waterloo Accelerator Center. As the company continuously expanded Jim Balsillie, former co-chief executive officer at BlackBerry, invested in the growing company and was made chair of the board of directors.
Balsillie helped take Magnet Forensics public in May 2021, raising $115 million.
Chris Albinson, the chief executive officer at Communitech, said a proposed sale like this puts an international spotlight on the region’s technology sector.
“You have to give a tip of the hat to Jad, Adam and Jim Balsillie,” said Albinson.
They built a business around Saliba’s initial software solution, and chased a global opportunity, he said. Acquisitions traditionally reflect the future value of the technology, and innovative cybersecurity solutions have global markets, he added.
“It is another sign of local founders going after really big global opportunities and doing what it takes to go after them,” said Albinson.
As BlackBerry imploded, some of the leading talent from there helped Magnet Forensics expand and grow. Now, Albinson predicts some of the leaders at Magnet will become investors, mentors and advisers to the next generation of startups.
“I am excited for the ecosystem,” said Albinson. “We are going to be talking about the Magnet alumni group in five years, and the new things they are working on.”
Chicago-based Thoma Bravo intends to take Magnet private and merge it with Atlanta-based Grayshift LLC, a mobile-device digital forensics company that it acquired in July 2022.
The proposed sale will benefit this region, even though the buyers are American, said Albinson.
“It shows we are building really big companies and people should pay attention, and that’s important for attracting capital and talent,” said Albinson.
Magnet Forensics’ early days were in the Waterloo Accelerator Center in the Donald Johnston Research and Technology Park on the North Campus of the University of Waterloo.
“The success of organizations like ours is 100 percent defined by the success of our founders,” said Tabatha Laverty, the Accelerator Center’s vice-president of marketing and external relations, in an email.
“With this being the largest acquisition to come from the region, following an incredibly successful and landmark IPO, we hope Magnet’s success will inspire others to see what is possible,” said Laverty.
The record-breaking deal comes at a time of cuts and layoffs in much of the tech sector. Layoffs have occurred at several startups around the region in recent months as venture capital investment slows, interest rates rise and there is increasing talk of a coming recession.
Carmi Levy, a tech analyst based in London, Ont., called the Magnet deal a landmark moment in the region’s tech sector.
“It is a huge win, not only for Magnet Forensics but the entire region, the ecosystem,” said Levy. “This really is a validation of what makes the entire region such a leader in the Canadian tech landscape.”
The number of tech workers in the Toronto-Waterloo Corridor is on track to surpass Silicon Valley sometime in the coming months, and deals like this will support that momentum.
“If you are ever looking for proof that the Kitchener-Waterloo tech model is a world-leading example of how to do tech right, this absolutely is it,” said Levy.