Foreign Firm Looking to Buy Cyber-tracking Startup NSO for Up to $130m

Sale of developer of cellphone tracking and interception software will require Defense Ministry approval.

NSO, which makes intelligence collection tools that enable governments to snoop on smartphones for security threats, is in advanced talks to sell itself to a foreign company for somewhere between $120 million and $130 million, TheMarker has learned.

The closely held company, formed in 2009, denies it but the sale has reportedly reached the due diligence stage. The buyer is likely a British company, sources said.

NSO has developed a system for defense agencies that tracks conversations and encrypted data from smartphones, tablets and other mobile devices. Because the technology is so security sensitive, the sale would require the approval of the Defense Ministry, which bans the sale of the technology from private buyers. The ministry declined to comment, saying it “does not usually address defense export issues.”

Pegasus, the software program developed by NSO, can not only be used to record conversations and to gain access to photos, text messages and Internet traffic, but can also take complete control of mobile devices. It can remotely operate the device’s camera to surreptitiously film the user’s environment. NSO’s revenues for 2013 are expected to reach $40 million, according to information received by TheMarker.

Last May, the company reported that it had received an acquisition offer worth between $80 million and $130 million, including one from an unidentified American company for between $80 million and $100 million.

NSO, which is based in Herzilya Pituach and employs 50 people, was formed by Omri Lavie, Shalev Houlio and Niv Carmi. Lavie and Houlio are serial entrepreneurs who formed MediaAnd in 2007 and CommuniTake the following year. Carmi left the company a short while after it was founded, leaving Houlio and Shalev as the main shareholders. A group of investors led by Adi Shalev, a partner in the Genesis Partners venture capital fund, hold a 30% stake.

According to Bloomberg, there are 230 companies in the data interception and tracking industry, among them such prominent firms as Europe’s Nokia Solutions and Networks (formerly Nokia Siemens Networks), the Israeli companies Nice Systems, Verint and Allot Communication and the American BlueCoat and SS8.

Reuters