Private equity and growth capital firm Thomas Bravo has announced that it will invest $1.8 billion (~$1.34 billion) in Magnet Forensics, a Waterloo-based company that develops software for defense forces and businesses to investigate cybersecurity threats.
Magnet Forensics is purchased by Thomas Bravo, Morpheus Buyer Inc. It will be controlled by a newly created corporation that will pay Magnet Forensics shareholders a 15% premium over Thursday’s closing price on the Toronto Stock Exchange. After the acquisition, Morpheus will merge with mobile device forensics outfit Greyshift, which Thomas Bravo took control of last July.
The transaction is expected to close in Q2 2023, subject to shareholder and other customary approvals.
“We look forward to bringing together the complementary capabilities of Magnet and Grayshift to create a leader in the digital forensics and cybersecurity space,” Thomas Bravo partner Hudson Smith said in a press release. And it will be well-positioned to offer more solutions to its customers.”
In the year Started in 2010, Magnet Forensics develops digital forensics software that acquires, analyzes, reports and manages evidence from computers, mobile devices, the Internet of Things and cloud services. The company was founded by Jade Saliba, a Waterloo Regional Police officer who worked in the police force’s high-tech crime unit. After developing magnetic forensics software in his room, Saliba decided to strike out on his own and sell the technology for a license fee, teaming up with Jim Balsillie and Adam Belsher, then Blackberry executives.
Before Magnet Forensics went public, it attracted investment from In-Q-Tel, a non-profit organization dedicated to the American intelligence community. The company says its software is used by more than 4,000 public and private sector customers — such as police forces, intelligence agencies, tax authorities, border guards and militaries — in more than 100 countries, helping investigators secure assets and maintain national security.
Before the acquisition, the business was booming (granted, Thomas Bravo submitted a proposal early last October). During its Q3 2022 earnings call, Magnet Forensics reported that annual recurring revenue increased 50% year-over-year to $80.9 million, while EBITDA — before interest, taxes, depreciation and amortization — rose 25% to $5.9 million.
Magnet has benefited from the expansion of the digital forensics market. It is expected to grow from $5.8 billion in 2022 to $10.9 billion in 2028, according to the Emark report.
Adam Belsher, who serves as Greyshift’s CEO, said the integration of Greyshift’s mobile access and extraction capabilities and Magnet’s digital forensics suite will position organizations strongly – enabling customers to better extract, organize, analyze, collaborate and manage digital forensic evidence.
“We believe the combination of Magnet and Grayshift will unlock greater value for our customers through further integration and expansion, resulting in more seamless workflows for recovering and analyzing digital data critical to investigations, and ultimately contributing to our shared mission of pursuing justice,” Belsher said in a statement. We look forward to partnering with Tom Bravo and Grayshift to build on our digital analytics suite to serve emerging organizations and use cases.
For Toma Bravo, which currently has more than $114 billion in assets under management, Magnet Forensics is the latest in a series of high-profile software venture acquisitions. In the year In 2022, the company acquired multi-billion dollar cybersecurity startups Ping Identity, SailPoint, Forge Rock, Bottomline Technologies and Kupa Software.