BlueCat sells in Toronto for $700 million amid slew of deals for Canadian tech companies

BlueCat founders Richard Hyatt, left, and Michael Hyatt._ Beyond Infinity Photography / Newsletter

BlueCat Networks, a Toronto-based network security vendor, was acquired by the US private equity firm for more than $700 million, one of the Canadian tech acquisitions announced this week.

The purchase by Audax Private Equity comes five years after US private equity firm Madison Dearborn Partners LLC purchased control of BlueCat co-founders and owners Michael and Richard Hyatt in a deal that valued the company at the time at approximately $400 million. The Hyatt brothers, who held a minority stake in the 2017 deal, are selling the balance, along with Madison Dearborn, to Audax.

Audax’s managing director, Iveshu Bhatia, said in a statement that BlueCat is “positioned for both organic and inorganic growth,” meaning his Boston and San Francisco-based company sees it as a way to acquire other companies in a market driven by more proliferation of connected devices, cloud adoption, and bolstering security concerns. cyber

Terms were not disclosed but the amount was provided to The Globe and Mail by three industry sources. The Globe and Mail did not identify the sources because they are not authorized to discuss the matter publicly. The deal is expected to close by September 30. William Blair and Nomura Securities International have provided investment banking advice to BlueCat.

The deal was part of A busy week for the Canadian tech scene, including the giant crash industry conference in Toronto. Glia Inc. said. New York fintech said Thursday it has acquired Vancouver-based chatbot provider Finn AI after partnering with the Canadian company to sell its products globally. Terms were not disclosed, but an informed source said the value of the Finnish deal is between $25 million and $30 million.

The day before, Axonify, a Waterloo-based employee training software provider, said it had bought Nudge Rewards Inc. Based in Toronto, it is a startup that sells a mobile communications platform to an employee with annual revenue of approximately $5-10 million. Axonify itself was bought for nearly $250 million last year by Luminate Capital Partners in San Francisco.

In an interview, Nudge CEO Lindsey Goodchild said that she initially wanted to raise growth capital, not sell. She changed her mind after concluding that combining forces with another provider of employee communications tools was a better option because many of Nudge’s 50 customers would rather have a single tool that meets a range of employee-facing needs rather than a wide range of offerings from multiple vendors.

She said she was also drawn to Axonify because she is Canadian and – unlike other suitors – is CEO-led, has a diverse management team and a strong culture. “This really stood out,” said Mrs. Goodchild.

The rapidly deteriorating market conditions, she added, “made me want to get it done quickly because there’s bad news every day.”

The BlueCat deal marks the second complete exit by the Hyatt brothers, one of the most successful entrepreneurial teams in Toronto’s bustling tech scene.

In his early twenties, Richard wrote software to help their father, an engineer, manage risk assessment on complex projects, and then set up a company called Dyadem International, Ltd. , to sell the program to large organizations. IHS Inc. Dyadem in 2011 for approximately $100 million.

The BlueCat brothers created the BlueCat in the early 2000s after Richard purchased a domain name server for Dyadem. It was expensive and complicated, so he created his own that was smaller and faster. They decide to sell the product to businesses and governments to securely connect users and devices with Internet-based applications and services.

Today, BlueCat counts 30 percent of Fortune 100 companies as customers. It has over $100 million in annual revenue, over 400 employees and is profitable. BlueCat has expanded its sales by 20 percent annually since 2017.

“This market is in a lot of turmoil,” BlueCat CEO Stephen DeVito told The Globe and Mail. But also a lot of private equity firms are looking to invest money in well-managed companies. We had a lot of interest. We are very excited to have a new partner injecting capital into the business.”

The brothers stepped back from their day-to-day roles in 2013 and 2014 to make room for professional managers, and decided to sell to Madison Dearborn after interest in private equity in their space intensified.

The pair maintain an active role in the Canadian tech scene as start-up investors and advisors to some of the country’s largest venture capital firms. They are also co-founders of the University of Toronto’s Creative Destruction Lab.

Richard Hyatt also leads another startup,, which has provided free QR codes, touchless menus, and contact tracing software to hundreds of restaurants, construction companies, event coordinators, and schools in person.

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