U.S. security firm buys Chrysalis for $20M

Ottawa security hardware firm Chrysalis-ITS was purchased this week by American security provider Rainbow Technologies for US$20 million in cash.


deal was first announced mid-August and was closed in a matter of weeks since the companies were familiar with each other and a natural fit product-wise, according to president of Rainbow eSecurity Shawn Abbott.

“”The business fit is very, very clear. This has been driven by our customers first and foremost. The support from management on both sides was incredibly strong,”” said Abbott.

Chrysalis’ main product is a root key management system called Luna — a product category Rainbow, based in Irvine, Calif., has moved away from over the years. “”We’ve had to move our focus because of the dot-com crash like all companies, and we chose not to focus on that category. We backed away from it, which created a really clean fit (with Chrysalis),”” said Abbot.

Chrysalis has customers in banking and the private sector, but one of its main markets is government. Last year, for example, the company developed a cryptographic digital signature solution with partner AiT for international border security.

Chrysalis’ largest government customer contingent is in Canada, while Rainbow’s base is American. The companies do share some customers like the Royal Canadian Mounted Police, but there will be ample cross-selling opportunities, said Abbott. He spent some time meeting with customers prior to this week’s transaction.

The privately-owned Chrysalis was inevitably an acquisition target, said its president and CEO David Longbottom. “”As a significant but still relatively small player in the security industry, I’ve been paying pretty close attention to the consolidation that inevitably happens in a market as it matures and as customers start to look for larger suppliers,”” he said.

Chrysalis will retain its 70 employees and offices in Ottawa the U.K., Germany and Hong Kong for the time being and operate as a division of Rainbow. Chrysalis has some cache in global security circles, said Abbott. “”We’d be fools to squander that. Certainly for years to come, people will know the Chrysalis name.””

Longbottom added that Rainbow’s purchase offer was attractive to Chrysalis not only as a complimentary product fit but as an opportunity to keep staff on board. “”There is no substantial overlap between the teams and Rainbow is one of these companies that’s grown up through acquisitions of this type,”” he said.

Over the next few years, Chrysalis will fade into the background and become absorbed into Rainbow. The Luna brand name will remain indefinitely.

Longbottom said he will be part of a team that oversees the amalgamation of the two companies and will then seek a senior management role in Rainbow.

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