Magnet Forensics Inc. (TSX:MAGT), a Canadian technology company that sells digital investigation software, has been sold to U.S. private equity firm Thoma Bravo for an implied Equity Value of $1.75 billion and an implied Enterprise Value (EV) of $1.66 billion, valuing the transaction at an EV/Revenue of 13.9x and an EV/EBITDA of 173.0x.
Magnet Forensics is a tech company in the Waterloo, Ontario area, and its senior management is populated by former executives of BlackBerry. Mr. Belsher and Mr. Saliba co-founded the company in 2010, starting by selling software to law enforcement agencies to investigate cases of human trafficking, child sexual exploitation, and other crimes. The software is now used by over 4,000 organizations, including law enforcement agencies and corporations, to investigate cybercrimes.
The company went public in May 2021 and raised $115.1 million at $17.00 per share.
The takeover was unanimously agreed to by Magnet Forensics‘ board and controlling shareholders. The transaction is expected to be completed in the second quarter of 2023, subject to regulatory and shareholder approvals with a shareholder vote scheduled for March.
Deal Details
The agreement allows Thoma Bravo to acquire Magnet Forensics subject to obtaining shareholder and other customary approvals. Holders of the outstanding Subordinate Voting Shares (SV Shares) of Magnet Forensics, will receive $44.25 cash per share, while the specific “Rolling Shareholders” will receive only $39.00 for each outstanding SV Share and Multiple Voting Share (MV Share) of the company. The transaction would result in Magnet Forensics becoming a privately held company.
The purchase price represents a premium of approximately 15.4% to the closing price on the Toronto Stock Exchange on January 19, 2023, the last trading day before the announcement of the transaction, and a premium of approximately 41% to the 90-day volume-weighted average trading price. The purchase price is also above the 52-week high closing price and represents a premium of approximately 160% to the company’s initial public offering price but was below stock price estimates from some analysts.
Thoma Bravo Plans to Merge Magnet Forensics with Grayshift
After the completion of the transaction, Thoma Bravo intends to combine Magnet Forensics with Grayshift LLC, a company that Thoma Bravo acquired majority control of in July 2022. Magnet Forensics was originally a leading bidder to buy Grayshift last year but was outbid by Thoma Bravo.
Grayshift is a digital forensics company that specializes in extracting data from mobile devices, while Magnet provides search tools for computers and digital workflows. The combination of these companies’ complementary offerings is expected to create a powerful end-to-end digital investigations platform, empower more public safety agencies around the world, and create a competitor to Cellebrite Mobile Synchronization based in Israel.
The combination of Magnet Forensics and Grayshift is expected to unlock value for customers by integrating and expanding its product suite, resulting in more seamless workflows in the recovery and analysis of critical digital evidence. The acquisition will allow both companies to expand their capabilities and services, as well as access new markets and customers.
The co-founders of Magnet Forensics, Adam Belsher and Jad Saliba, and the company’s chairman, Jim Balsillie, own 28.9 million super voting shares and hold 95% voting control. They will roll 55% of their shares into the acquired company’s stock. Mr. Belsher will be the CEO of the combined company, and the deal guarantees executive positions for Mr. Saliba and the Grayshift founders, David Miles and Braden Thomas, as well as a board seat for Mr. Balsillie.
Company Comments
Adam Belsher, CEO of Magnet Forensics commented, “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.”
David Miles, Co-Founder and Chief Executive Officer of Grayshift added, “Bringing Magnet and Grayshift together will accelerate innovation and ultimately transform digital investigations. Today’s announcement is a defining moment in the industry, and together we will accelerate the future of digital forensics.”
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