Kitchener-Waterloo’s Magnet Forensics has entered into a definitive agreement to be acquired by software-focused American private equity firm Thoma Bravo.
Thoma Bravo has struck a $1.8 billion CAD deal to buy the publicly-traded Canadian cybersecurity company and take it private.
Thoma Bravo has agreed to pay $44.25 per share to owners of Magnet’s subordinate voting stock, a more than 15 percent premium to Magnet’s January 19 closing price.
Magnet announced the deal hours after the Investment Industry Regulatory Organization of Canada halted trading of Magnet’s shares on the Toronto Stock Exchange (TSX) earlier this morning, citing “pending news.” Following the announcement, Magnet resumed trading.
Following the close of the deal, Thoma Bravo intends to combine Magnet with fellow digital forensics firm Grayshift, a United States-based company that Thoma Bravo acquired majority control of in July 2022.
Founded in 2009 and led by a former cop and ex-BlackBerry executives, Magnet develops digital investigation software that acquires, analyzes, and shares evidence from a variety of devices. The company, which currently trades on the TSX as ‘MAGT,’ caters to thousands of law enforcement, government, military, and corporate organizations around the world.
The transaction, which remains subject to shareholder and other customary approvals, is expected to close by the second quarter of 2023. Once the deal is complete, Magnet will become a privately held company owned by a newly created corporation controlled by Thoma Bravo.
Thoma Bravo has agreed to pay $44.25 per share to owners of Magnet’s subordinate voting stock. This purchase price comes at a more than 15 percent premium to Magnet’s January 19 closing stock price of $38.35.
Market response to the Thoma Bravo deal has been positive: Magnet’s stock price has jumped more than 14 percent percent to $43.80 at time of publication, compared to its January 19 closing share price.
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Magnet co-founders, CEO Adam Belsher and CTO Jad Saliba, along with chairman Jim Balsillie (former BlackBerry chair and co-CEO), currently own all multiple voting shares and more than 95 percent voting control of the company.
Belsher, Saliba, and Balsillie have agreed to a price of $39 per share for their respective stakes in Magnet, but will roll over most of their shares into stock in the acquired company.
Since its 2021 TSX initial public offering (IPO), Magnet has continued to trade above its initial target—making it one of the few Canadian tech companies that went public amid a wave of 2021 IPOs to do so. Compared to Magnet’s IPO price, Thoma Bravo’s purchase price represents a premium of about 160 percent.
“We are confident that this transaction—joining two complementary organizations to form a new private company—offers the most compelling value creation for all our stakeholders and is a testament to the value of digital investigation solutions, the Magnet platform, our talented team, and loyal customer base,” said Belsher.
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Belsher and Saliba will take on “critical leadership positions” at the combined company, alongside Grayshift founders, CEO David Miles and CPO Braden Thomas, while Balsillie will serve on the board of the new firm.
Magnet has served as “a trusted and strategic partner” to Grayshift for some time now. For his part, Miles characterized this deal as “a defining moment” in the digital forensics industry.
The Magnet acquisition marks the latest in a string of buyouts for Thoma Bravo. Since tech valuations began to tumble amid the market downturn, the deep-pocketed private equity firm has been particularly active, snapping up a list of companies that includes Coupa Software, Anaplan, and Ping Identity.
As Thoma Bravo partner Hudson Smith put it, by bringing together Magnet and Grayshift together under one roof, the private equity firm hopes to create “a leader in the digital forensics and cyber security space.”
Feature image courtesy Magnet Forensics.