Waterloo tech company Magnet Forensics sold to US firm Thoma Bravo for $1.8B

WATERLOO — Waterloo tech firm Magnet Forensics says it is being acquired and taken private by US private equity firm Thoma Bravo in a deal worth about $1.8 billion.

In a release Friday, Magnet said the deal amounts to a 15 percent premium on the closing share price reached Thursday and a 41 percent premium on its 90-day average.

It’s also about 160 percent higher than the initial offer price of $17 a share when the company went public and shares began trading on the Toronto Stock Exchange in 2021.

Magnet’s shares jumped nearly 14 percent Friday on the news, closing at $43.66. Magnet shares reached an all-time high of about $57 in September 2021.

Communitech called the deal “the biggest exit in Waterloo Region tech history.”

In the agreement with Thoma Bravo, subordinate voting shareholders and their affiliates will receive $44.25 in cash per share, while rolling shareholders — which include founder and chief technology officer Jad Saliba, chief executive officer Adam Belsher, and Magnet board chair and former BlackBerry chief executive Jim Balsillie — will receive $39 per share.

Founded in 2010 by Saliba, a former Waterloo Regional Police officer, Magnet Forensics develops digital forensics software for police, governments and private companies that recovers, analyzes and manages evidence from computers, phones, the cloud and other digital devices.

Thoma Bravo, one of the world’s largest software investors, said it plans to combine Magnet Forensics with Grayshift LLC, a provider of mobile device digital forensics Thoma Bravo bought in July.

Saliba and Belsher will hold leadership positions in the new company, along with Grayshift founders David Miles and Braden Thomas. Balsillie will serve on the board of the combined company.

It was not known Friday if the deal would have any other direct impacts on Magnet staffing or operations at its Canadian and international offices. In September, the company said it expected to have 500 employees by the end of 2022.

“We believe the combination of Magnet and Grayshift will unlock tremendous value for our customers by further integrating and expanding our product suite which will result in more seamless workflows in the recovery and analysis of critical digital evidence to investigations and ultimately contribute to our shared mission of the pursuit of justice,” Belsher said in a release.

Merging Magnet and Grayshift “offers the most compelling value creation for all our stakeholders,” he said.

“Since early in Grayshift’s history, Magnet Forensics has been a trusted and strategic partner,” Miles said. “Bringing Magnet and Grayshift together will accelerate innovation and ultimately transform digital investigations.”

Hudson Smith, a partner at Thoma Bravo, said the complementary capabilities of the two firms will create a leader in the digital forensics and cybersecurity sector.

“Digital evidence is an increasingly critical aspect of investigations and the combined company will be well-positioned to further market expansion, accelerate innovation, and provide even greater solutions to its customers,” Smith said in the release.

“We look forward to leveraging Thoma Bravo’s deep industry, operational and investment expertise to help the combined company capture the tremendous growth opportunities ahead.”

Magnet’s initial public offering in 2021 was valued at just over $100 million. At the time, the company said IPO proceeds would be used to strengthen its financial position and advance growth strategies.

Third-quarter results, released in November and reported in US dollars, showed revenue of $25 million in the quarter, up 41 percent year-over-year, with net income of $1.4 million, compared to $2.2 million in the third quarter of 2021 .

Magnet predicted it would end 2022 with revenues of $96 to $98 million, representing growth of between 37 and 39 percent over 2021.

Since going public, Magnet has announced a number of expansions and acquisitions, including an expansion into Australia last fall, the acquisition of cybersecurity software firm Comae Technologies last spring, and the acquisition of Colorado-based DME Forensics in 2021.

With files from The Canadian Press

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