Israeli Cyberattack Firm NSO Bought Back by Founders at $1b Company Value

Two founders are partnering with European private equity fund Novalpina to purchase the controversial firm from Francisco Partners

Amitai Ziv
Amitai Ziv
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FILE PHOTO: Logo of the Israeli NSO Group company on a building in Herzliya, Israel, August 25, 2016.
FILE PHOTO: Logo of the Israeli NSO Group company on a building in Herzliya, Israel, August 25, 2016.Credit: Daniella Cheslow/AP
Amitai Ziv
Amitai Ziv

The founders of NSO Group, the controversial Israeli cybertechnology company, are buying it back, the firm reported on Thursday.

NSO did not release the terms of the deal but an industry source said that the management buyout assigned the company a market value of a billion dollars.

NSO stated that its management and founders, Shalev Hulio and Omri Lavi, together with the European private equity fund Novalpina, are buying a 60% stake in company from the U.S. private equity fund Francisco Partners, which owns the majority interest. Hulio and Lavi are expected to put up $100 million.

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A significant number of company employees are joining in the acquisition, NSO added.

NSO is perhaps the biggest and best-known of a handful of Israeli companies that specialize in creating tools that allow governments to spy electronically. Its flagship Pegasus 3 software for hacking mobile phones is so sophisticated that it does not even require the target to click on a link to open the device to eavesdropping.

The company's technology has been repeatedly implicated in abuses by its customers – governments that have allegedly used it to target journalists in Mexico, opposition figures in Panama and human rights activists in the Middle East.

Citizen Lab, a University of Toronto group that has played a leading role in exposing state-backed hackers, reported in October that an iPhone belonging to one of Saudi journalist Jamal's Khashoggi's confidantes had been infected by NSO's spy software only months before Khashoggi's grisly murder. The friend, Omar Abdulaziz, said he believed the software "played a major role" in his death.

NSO, whose headquarters is in Herzliya, says it has acted according to the law and that its software is designed to be used by law enforcement agencies solely to monitor and prevent terrorism and crime.

Founded in 2010, NSO was acquired four years later Francisco , which bought a 60% stake for $120 million. Under its new ownership, NSO quickly became a global operation through mergers with European and Israeli companies, including the Israeli company Circles. NSO says its 2018 revenues were $250 million and that it counts scores of customers around the world.

Francisco has been seeking to divest NSO for quite some time and had tentatively reached a deal last July to sell it to the Israeli cybersecurity company Verint at a $1 billion valuation in cash and shares. However, the deal fell through reportedly because Hulio and Lavi wanted NSO to remain an independent subsidiary of Verint after the sale, a condition that Verint opposed.

A year earlier, the U.S. private equity fund Blackstone Group was reportedly in talks to buy a 49% stake in NSO for $400 million. Blackstone is said to have pulled out under pressure from human rights groups.

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