Toronto’s BlueCat sells for $ 700-million plus amid slew of deals for Canadian tech firms

BlueCat co-founders Richard Hyatt, left, and Michael Hyatt._Beyond Infiniti Photography / Handout

Toronto network security vendor BlueCat Networks has been purchased by an American private equity firm for more than $ 700-million, one of a flurry of Canadian technology takeovers announced this week.

The purchase by Audax Private Equity comes five years after US private equity firm Madison Dearborn Partners LLC bought control of BlueCat from co-founders and owners Michael and Richard Hyatt in a deal valuing the company then at about $ 400-million. The Hyatt brothers, who maintained a minority stake in the 2017 deal, are selling the balance, alongside Madison Dearborn, to Audax.

Audax managing director Iveshu Bhatia said in a release that BlueCat “is primed for organic and inorganic growth,” meaning his firm, based in Boston and San Francisco, sees it as a vehicle for acquiring other companies in a market that is being driven by more proliferation of connected devices, cloud adoption and enhanced cybersecurity concerns

Terms were not disclosed but the amount was provided to The Globe and Mail by three industry sources. The Globe and Mail is not identifying the sources as they are not authorized to discuss the matter publicly. The transaction is expected to close by Sept. 30. William Blair and Nomura Securities International provided investment banking advice to BlueCat.

The deal was part of a busy week for the Canadian tech scene, including the giant Collision industry conference in Toronto. On Thursday, New York financial technology firm Glia Inc. said it had acquired Vancouver-based chatbot provider Finn AI after partnering with the Canadian company to sell its products to globally. Terms were not disclosed but a source familiar with the matter said the deal valued Finn at between US $ 25-million and US $ 30-million.

A day earlier, Waterloo-based employee training software provider Axonify Inc. said it had purchased Toronto-based Nudge Rewards Inc., a startup that sells an employee communication mobile platform with roughly US $ 5-million to US $ 10-million in annual revenues. Axonify itself was purchased for close to US $ 250-million last year by San Francisco’s Luminate Capital Partners.

In an interview, Nudge chief executive officer Lindsey Goodchild said she initially wanted to raise growth capital, not sell out. She changed her mind after concluding that combining forces with another provider of employee communications tools was a better choice as many of Nudge’s 50 customers preferred to have one tool that met a range of employee-facing needs rather than a slew of offersings from many vendors.

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

She added that the rapidly deteriorating market conditions “made me want to get it done quickly because there is bad news everyday.”

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

In his early 20s, Richard wrote a program to help their father, an engineer, manage risk assessment on complex projects, then built a firm called Dyadem International, Ltd., to sell the software to big enterprises. IHS Inc. bought Dyadem in 2011 for almost $ 100-million.

The brothers created BlueCat in the early 2000s after Richard bought a domain name server for Dyadem. It was expensive and complex so he created his own that was smaller and faster. They decided to sell the product to corporations and governments to connect users and devices securely to internet-based applications and services.

BlueCat today counts 30 per cent of Fortune 100 companies as clients. It has in excess of US $ 100-million in annual revenues, more than 400 employees and is profitable. BlueCat has expanded sales by 20 per cent per year since 2017.

“This market is in a lot of turmoil,” BlueCat chief executive officer Stephen Devito told The Globe and Mail. “But also a lot of private equity firms are looking to put money to work in well-run companies. We had a ton of interest. We’re superexcited to have a new partner injecting capital into the business. “

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

The pair maintain an active role in the Canadian technology landscape as startup investors and advisers to some of the country’s largest venture capital firms. They are also both founding partners of the University of Toronto’s Creative Destruction Lab.

Richard Hyatt is also leading another startup,, which has provided free QR codes, touchless menus and contact tracing software to hundreds of restaurants, construction firms, in-person event co-ordinators and schools.

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