NSO founders, management buy stake in firm from Francisco Partners

Market source says the deal values the Israel-founded company, which helps governments spy on phones, at about $1 billion; NSO says it had revenues of $250 million in 2018

Shoshanna Solomon is The Times of Israel's Startups and Business reporter

The logo of the Israeli company NSO Group is displayed on a building where it had offices in Herzliya until 2016. (AP Photo/Daniella Cheslow)
The logo of the Israeli company NSO Group is displayed on a building where it had offices in Herzliya until 2016. (AP Photo/Daniella Cheslow)

The management team and founders of Israeli cyber-intelligence firm NSO Group said Thursday they acquired, together with European private equity firm Novalpina Capital, global private equity firm Francisco Partners’s stake in the company. A market source said the deal valued the company at $1 billion.

Francisco Partners had acquired a 70 percent stake in 2014 from its founders for a reported $110 million to $130 million. In a statement on Thursday announcing the deal, the phone-tracking software firm founded in 2010 said it had revenues of $250 million in 2018, and dozens of licensed customers.

The management team and Novalpina are now joint owners of the company with each holding 50%, NSO said in the statement.

The firm’s phone tracking software, called Pegasus, has put NSO under the spotlight for months with dissidents, journalists and other opposition figures claiming the company’s technology has been used by repressive governments to spy on them.

These include Mexican, Saudi and Qatari journalists who have filed lawsuits against the company, and an Amnesty International employee who was allegedly targeted by the software.

Pegasus infects individuals’ phones by sending them text messages that tempt them to click an attached link. If the target clicks on the link, the company gains full control over the phone, including its contents and history, and the ability to activate its microphone and camera at will.

Last month one of the founders of the firm, Shalev Hulio, denied in a rare interview that its technology was used to target Saudi Arabian journalist Jamal Khashoggi in the lead-up to his murder last year, the daily Yedioth Ahronoth reported. He said the company’s software is only used against terrorists and criminals, and has helped thwart a number of terrorist plots in Europe.

The acquisition was led by NSO Group co-founders Hulio and Omri Lavie, together with members of the company’s senior executive team. A significant number of employees will participate in the acquisition, the statement said.

Hulio said in the statement that “this is an important and significant milestone for NSO,” and that together with Novalpina, its new equity partner, the two firms “will take NSO Group to the next level, launching new cutting-edge products that help our customers reduce the threats from terrorism and crime.”

In May, the Wall Street Journal reported that Francisco Partners was in talks to sell its stake in NSO to Verint in cash and stocks, but the deal then fell through. In July 2017, Calcalist reported that American multinational private equity firm the Blackstone Group was in advanced talks to buy 40 percent of NSO Group at a valuation of $1 billion.

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