Overseas Buyers Snap Up Two More Israeli Cyber Security Firms

NSO and Cyvera will soon have American owners, but their development centers will remain in Israel.

Two more Israeli cyber security firms are being snapped up by foreign buyers, with the private equity firm Francisco Partners being acquiring Herzliya-based NSO Group Technologies for $120 million and Palo Alto Networks is close to buying Cyvera for about $220 million, sources said yesterday.

The two acquisitions are the latest indication of global interest in Israeli cyber-security, a result of increased demand for defenses against computer attacks combined with Israel’s worldwide reputation in the field. Last month, Imperva announced the acquisition of Israeli companies Skyfence for $60 million and Incapsula for an undisclosed sum.

TheMarker has learned that Francisco Partners, whose portfolio includes a large number of cyber-security companies, is planning to open an office in Israel to be headed by Eran Gorev, a former CEO of Nice Systems and Alvarion. Francisco, which typically holds on to portfolio companies for four to five years, has bought to other Israeli security startups in the past -- Ex Libris and Dmatek (later remained Attenti Holdings), both in 2006, selling them within two years.

NSO, whose workforce of about 50 is expected to double over the next year, has developed sophisticated and militarily sensitive technology for use by security forces and governments for tracking calls and encrypted data on cellular telephones. The Defense Ministry approved the sale to Francisco Partners, which has offices in San Francisco and London, while imposing certain restrictions on selling the company’s technology abroad. NSO’s operations will remain entirely in Israel, as will the company’s intellectual property rights, something that one of the company’s founders, Shalev Hulio, said NSO insisted on.

Pegasus, NSO’s software does more than make it easier for governments or others to eavesdrop on cellphone conversations. It can also be used to record conversations and gain access to photos, text messages and websites viewed from a smartphone and take control of the device’s built-in camera to surreptitiously film the user’s environment. The company was founded in 2009 by Hulio, Omri Lavie and Niv Carmi.

Cyvera’s sale to Palo Alto Networks, a U.S.-based network security firm founded by Israeli Nir Zuk,  is expected to close within the coming week. The company, which was founded in 2011 by Uri Alter, Netanel Davidi, Gal Badishi and Moshe Ben Abu, has developed products designed to prevent remote attacks on computer networks using Microsoft-based servers and end-points. Cyvera is formally headquartered in San Francisco, but 34 of its 38 employees work out of its Tel Aviv research and development center.

The company raised its first round of capital from the Elul and Kashtan groups, and another $2 million in 2011 from San Francisco-based Blumberg Capital. Last August it completed an $11 million fund-raising round led by Battery Ventures, the U.S. venture capital fund, in which Blumberg also participated.

A mock cyber attack scenario. Israel is an emerging power in the cyber security market.
AP