Magnet Forensics Inc. Enters Into Definitive Settlement to be Acquired by Thoma Bravo

The Buy Value represents a premium of roughly 15% to the closing value on the Toronto Inventory Change (the “TSX”) of the SV Shares on January 19, 2023, the final buying and selling day previous to the announcement of the Transaction, and a premium of roughly 41% to the 90-trading day quantity weighted common buying and selling value per SV Share as at that date. The Buy Value can also be above the 52-week excessive closing value of the SV Shares as of January 19, 2023, and represents a premium of roughly 160% to the Firm’s preliminary public providing value of the SV Shares of CA$17.00. This worth additional represents an 87% premium to the closing value on October 5, 2022, the final day previous to Thoma Bravo’s submission of its preliminary non-binding proposal for an acquisition of the Firm.

Following the closing of the Transaction, Thoma Bravo intends to mix the Firm and Grayshift LLC, which Thoma Bravo acquired majority management of in July 2022. The businesses’ complementary choices are anticipated to create a robust end-to-end digital investigations platform empowering extra public security businesses around the globe to hunt justice, clear up crimes, and shield victims. Grayshift is a number one supplier of cellular gadget digital forensics, specializing in lawful entry and extraction. By combining Grayshift’s cellular entry and extraction capabilities with the Firm’s digital investigation suite, clients are anticipated to have the ability to leverage the platform to extract, course of, look at, collaborate on and handle digital forensic proof. Adam Belsher and Jad Saliba, Founders of Magnet, and David Miles and Braden Thomas, Founders of Grayshift, will every maintain vital management positions within the mixed firm. Magnet’s Chair, Jim Balsillie, will serve on the board of the mixed firm.

“We imagine the mix of Magnet and Grayshift will unlock large worth for our clients by additional integrating and increasing our product suite which is able to end in extra seamless workflows within the restoration and evaluation of vital digital proof to investigations and in the end contribute to our shared mission of the pursuit of justice,” stated Adam Belsher, CEO of Magnet. “We sit up for partnering with Thoma Bravo and Grayshift to construct upon our digital investigation suite to additional innovate and proceed to serve a rising variety of organizations and use circumstances. We’re assured that this transaction — becoming a member of two complementary organizations to type a brand new non-public firm — provides probably the most compelling worth creation for all our stakeholders and is a testomony to the worth of digital investigation options, the Magnet platform, our gifted staff, and constant buyer base.”

“Since early in Grayshift’s historical past, Magnet Forensics has been a trusted and strategic accomplice,” stated David Miles, Co-Founder and Chief Government Officer of Grayshift. “Bringing Magnet and Grayshift collectively will speed up innovation and in the end remodel digital investigations. In the present day’s announcement is a defining second within the trade, and collectively we’ll speed up the way forward for digital forensics.”

“We sit up for bringing collectively the complementary capabilities of Magnet and Grayshift to create a pacesetter within the digital forensics and cyber safety area,” stated Hudson Smith, a Associate at Thoma Bravo. “Digital proof is an more and more vital side of investigations and the mixed firm can be well-positioned to additional market enlargement, speed up innovation, and supply even higher options to its clients. We sit up for leveraging Thoma Bravo’s deep trade, operational and funding experience to assist the mixed firm seize the large development alternatives forward.”

Transaction Particulars

The Firm entered into the Association Settlement primarily based on the unanimous approval of the Firm’s board of administrators (the “Board”) (with conflicted administrators abstaining) and the unanimous suggestion of a committee of unbiased administrators (the “Particular Committee”), that the Transaction is honest from a monetary standpoint to the holders of the Shares (the “Shareholders”) (apart from the Rolling Shareholders), and is in the most effective pursuits of the Firm. The Association Settlement was the results of a complete negotiation course of that was undertaken at arm’s size with the oversight and participation of the Particular Committee suggested by unbiased and extremely certified authorized and monetary advisors. See “Unanimous Board Approval” beneath.

The Rolling Shareholders are successfully rolling over 55% of their Shares (within the combination roughly 15.9 million MV Shares and roughly 0.2 million SV Shares, collectively, the “Rollover Shares”) at an implied worth per Share equal to CA$39.00 per Share, such that upon completion of the Transaction, they are going to be minority shareholders of the Purchaser. The remaining Shares owned by the Rolling Shareholders (within the combination roughly 13.0 million MV Shares and roughly 0.2 millionSV Shares) can be bought to the Purchaser for money at CA$39.00 per Share. The Rolling Shareholders, on the request of, and after negotiations with, the Particular Committee, agreed to just accept much less per Share as a way to profit the holders of SV Shares.

As on the date hereof, the Rolling Shareholders personal or management, straight or not directly, the entire issued and excellent 28,903,303 MV Shares, and Messrs Saliba and Belsher, collectively, personal or management, straight or not directly, an combination of 368,522 SV Shares, representing roughly 3.0% of the Firm’s issued and excellent SV Shares.

Unanimous Board Approval

The Board, with Messrs Saliba, Belsher and Balsillie declaring their conflicts of curiosity and abstaining from voting, unanimously authorised the Association Settlement following receipt of the unanimous suggestion of the Particular Committee, which was appointed by the Board to, amongst different issues, assessment strategic options for the Firm together with the Transaction, contemplate the Firm’s greatest pursuits and the implications to shareholders and different stakeholders, and supply the Board with recommendation and proposals with respect to the Transaction. As such, the Board unanimously, with the conflicted administrators abstaining from voting, recommends that holders of SV Shares vote in favour of the Transaction. The Firm intends to carry a particular assembly of Shareholders in March 2023 (the “Shareholders’ Assembly”), the place the Transaction can be thought-about and voted upon by Shareholders of document.

In making its willpower to unanimously advocate approval of the Transaction to the Board, the Particular Committee, and within the Board’s willpower to approve the Transaction, the Board, thought-about, amongst different issues, the next causes for the Transaction:

• Equity Opinions – receipt of the equity opinions from every of Morgan Stanley & Co. LLC (“Morgan Stanley”) and CIBC World Markets Inc. (“CIBC Capital Markets”), which every concluded that, primarily based upon and topic to the assumptions, limitations and {qualifications} set out of their respective opinions, that the consideration to be obtained by the holders of SV Shares (apart from the Rolling Shareholders) pursuant to the Transaction is honest, from a monetary standpoint, to such shareholders;

• Formal Valuation – the formal valuation ready by CIBC Capital Markets concluded that, primarily based upon and topic to the assumptions, limitations and {qualifications} set forth thereof, the honest market worth of the Shares as at January 20, 2023 was within the vary of CA$36.50 to CA$48.75 per Share;

• Association Settlement Phrases – the Association Settlement is the results of a complete negotiation course of that was undertaken at arm’s size with the oversight and participation of the Particular Committee suggested by unbiased and extremely certified authorized and monetary advisors and resulted in phrases and circumstances which might be cheap within the judgment of the Particular Committee and the Board, together with a customary “fiduciary out” that can allow the Firm to enter right into a Superior Proposal (as outlined within the Association Settlement) in sure circumstances;

• Break Charge and Reverse Break Charge – the break payment payable by the Firm of CA$50 million is affordable within the circumstances and solely payable in customary and restricted circumstances, and the Firm is entitled to a reverse break payment of CA$70 million in sure circumstances if the Association Settlement is terminated;

• Market Verify – the Firm, with the help of Morgan Stanley, performed a market examine subsequent to the receipt of an preliminary proposal from the Purchaser that didn’t end in any proposal that was superior to the Transaction;

• All Money Consideration – the all money consideration offers holders of SV Shares with certainty of worth, and is of explicit profit given the restricted buying and selling and lack of liquidity within the SV Shares;

• Worth of Shares as a A number of of Revenues & EBITDA – the beneficial comparability of implied income and adjusted EBITDA multiples per SV Share of roughly 10x the portion of 2023 estimated income attributable to non-rolling holders of SV Shares and roughly 51x the portion of 2023 estimated adjusted EBITDA attributable to non-rolling holders of SV Shares, respectively, when in comparison with comparable precedent transactions in addition to the present buying and selling worth of trade friends and their corresponding implied multiples with such estimates primarily based on prevailing fairness analysis analyst consensus estimates for each the Firm and trade friends. This worth was obtained, partially, by having the Rolling Shareholders comply with a purchase order value of CA$39.00 per Share as a way to profit the holders of SV Shares;

• Minority Vote and Courtroom Approval – the Transaction have to be authorised by not solely two-thirds of the votes forged by Shareholders, but additionally by a majority of the minority in accordance with MI 61-101 (as outlined beneath), and by the Ontario Superior Courtroom of Justice (Business Checklist), which is able to contemplate the equity and reasonableness of the Transaction to all Shareholders; and

• Help for the Transaction – as described beneath, the entire Rolling Shareholders in addition to the entire administrators and sure of the officers of the Firm have entered into voting help agreements, pursuant to which they’ve agreed to, amongst different issues, vote in favour of the Transaction on the Shareholders’ Assembly.

Cautionary Be aware Relating to Ahead-Wanting Data

This press launch accommodates “forward-looking info” and “forward-looking statements” (collectively, “forward-looking info”) throughout the which means of relevant securities legal guidelines. Such forward-looking info or statements (“FLS”) are offered for the aim of offering details about administration’s present expectations and plans referring to the longer term. Readers are cautioned that reliance on such info might not be acceptable for different functions. Any such FLS could also be recognized by phrases equivalent to “proposed”, “expects”, “intends”, “might”, “will”, and comparable expressions. FLS contained or referred to on this press launch contains, however shouldn’t be restricted to, statements relating to the proposed timing and numerous steps contemplated in respect of the Transaction, the holding of the Firm’s Shareholders’ Assembly and the outcomes of the completion of the Transaction, the mix of the Firm and Grayshift, the ensuing digital forensics platform, advantages to clients, future innovation, creation of worth for stakeholders, acceleration of the way forward for digital investigations, and capturing development alternatives.

FLS relies on a lot of components and assumptions which have been used to develop such statements and data, however which can show to be incorrect. Though the Firm believes that the expectations mirrored in such FLS is affordable, undue reliance shouldn’t be positioned on FLS as a result of the Firm may give no assurance that such expectations will show to be right. Elements that might trigger precise outcomes to vary materially from these described in such FLS embody, with out limitation, the next components, lots of that are past the Firm’s management and the results of which may be tough to foretell: (a) the likelihood that the Transaction won’t be accomplished on the phrases and circumstances, or on the timing, at the moment contemplated, and that it might not be accomplished in any respect, on account of a failure to acquire or fulfill, in a well timed method or in any other case, required shareholder, Courtroom and regulatory approvals and different circumstances of closing obligatory to finish the Transaction or for different causes; (b) dangers associated to tax issues; (c) the potential of antagonistic reactions or modifications in enterprise relationships ensuing from the announcement or completion of the Transaction; (d) dangers referring to Firm’s potential to retain and appeal to key personnel throughout and following the interim interval; (e) the potential of litigation referring to the Transaction; (f) credit score, market, forex, operational, liquidity and funding dangers typically and relating particularly to the Transaction, together with modifications in financial circumstances, rates of interest or tax charges; (g) enterprise, operational and monetary dangers and uncertainties referring to the COVID-19 pandemic; (h) dangers associated to the Firm ensuing from the mix of the Firm and Grayshift in retaining current clients and attracting new clients, retaining key personnel, executing on development methods, advancing its product line and defending its mental property rights and proprietary info; (i) dangers associated to the Firm’s potential to stop unauthorized entry to or disclosure, loss, destruction or modification of knowledge, by cybersecurity breaches or pc viruses disrupting the performance of the Firm’s merchandise; (j) the affect of competitors; (okay) modifications and traits within the Firm’s trade and the worldwide economic system; and (okay) the recognized threat components included within the Firm’s public disclosure, together with the annual info type dated March 9, 2022, which is obtainable on SEDAR at www.sedar.com and on the Firm’s web site at www. magnetforensics.com. If any of those dangers or uncertainties materialize, or if the assumptions underlying the FLS show incorrect, precise outcomes or future occasions may differ materially from these anticipated within the FLS. Though the Firm has tried to determine essential threat components that might trigger precise outcomes to vary materially from these contained in FLS, there could also be different threat components not presently identified to the Firm or that the Firm presently imagine are usually not materials that might additionally trigger precise outcomes or future occasions to vary materially from these expressed in such FLS. The FLS on this press launch mirror the present expectations, assumptions, judgements and/or beliefs of the Firm primarily based on info at the moment obtainable to the Firm, and are topic to vary with out discover.

Any FLS speaks solely as of the date on which it’s made and, besides as could also be required by relevant securities legal guidelines, the Firm disclaims any intent or obligation to replace any FLS, whether or not because of new info, future occasions or outcomes or in any other case, besides as required beneath relevant securities legal guidelines. The FLS contained on this press launch are expressly certified by this cautionary assertion. For extra info on the Firm, please assessment the Firm’s steady disclosure filings which might be obtainable at www.sedar.com.

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