Thoma Bravo, a private equity and growth capital firm, has announced plans to buy digital forensics firm Magnet Forensics for CAD 1.8 billion (approximately $1.34 billion).

According to a report, Magnet Forensics will be purchased by Morpheus Purchaser Inc., a newly formed corporation controlled by Thoma Bravo that will pay shareholders a 15% premium over the closing price on the Toronto Stock Exchange. Morpheus will merge with Grayshift, a mobile device forensics company in which Thoma Bravo acquired majority control last July.

“We look forward to bringing together the complementary capabilities of Magnet and Grayshift to create a leader in the digital forensics and cyber security space,” Thoma Bravo partner Hudson Smith said in a press release. “Digital evidence is an increasingly critical aspect of investigations. The combined company will be well-positioned to further market expansion, accelerate innovation and provide even greater solutions to its customers.”

Magnet Forensics, founded in 2010, specializes in digital forensics software for law enforcement agencies, forensic labs, and corporate security teams. The company has a strong reputation for providing high-quality products and services that allow investigators to recover and analyze data from various devices, including computers, mobile phones, and cloud services.

During its Q3 2022 earnings call, Magnet Forensics reported that its annual recurring revenue increased 50% year-over-year to $80.9 million, while EBITDA — earnings before interest, taxes, depreciation, and amortization — increased from 25% to $5.9 million. It profited from the growing market for digital forensics, which, according to a recent Imarc report, is expected to grow from $5.8 billion in 2022 to $10.9 billion in 2028.
According to Grayshift CEO Adam Belsher, the combination of Grayshift’s mobile access and extraction capabilities and Magnet’s digital investigation suite will position the merged firms firmly — allowing customers to examine and manage better digital forensic evidence.

“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 statement. “We look forward to partnering with Thoma Bravo and Grayshift to build upon our digital investigation suite to innovate further and continue to serve a growing number of organizations and use cases.”

For Thoma Bravo, which now has more than $114 billion in assets under management, Magnet Forensics is the latest in a series of high-profile software venture purchases. In 2022, the firm spent billions of dollars buying cybersecurity startups Ping Identity, Sailpoint, ForgeRock, Bottomline Technologies and Coupa Software.

This acquisition represents a significant move in the digital forensics industry, as it brings together two major players in the field. This merger aims to create an end-to-end digital investigations platform that will assist more police agencies worldwide in delivering justice, solving crimes, and protecting victims. It will also form a more competitive landscape in the digital forensics industry, as the combined company will be able to offer a more comprehensive range of solutions than any of its competitors.

The transaction is expected to close by Q2 2023, subject to shareholder and other customary approvals.