U.S. Tech Company Verint Reportedly in Talks to Buy Israeli Cybersurveillance Firm NSO

According to the Wall Street Journal Verint is offering around $1 billion for NSO, which sells military-grade technology

An iPhone in front of NSO Group's headquarters in Herzliya, Israel, August 28, 2016.
Jack Guez, AFP

The Israeli-U.S. cybersecurity company Verint Systems is reportedly negotiating to buy NSO Group – an Israeli maker of cybersurveillance products – for $1 billion, The Wall Street Journal reported Monday.
NSO, a secretive company whose military-grade technology includes Pegasus spyware, has stoked controversy in the past on accusations that it is used by governments to spy on its citizens.

Verint has offered to pay NSO’s controlling shareholder, San Francisco-based private equity firm Francisco Partners, with its own stock and assumed debt, the Journal reported. The transaction, if completed, would create one of the world’s largest cyber companies.

Francisco Partners, which paid $120 million to buy a majority stake in NSO in 2014, would become the largest shareholder in Verint if the deal is completed. 

Neither Verint’s spokesperson nor NSO founders Shalev Hulio and Omri Lavie would comment. However, a source who asked not to be identified told Reuters that NSO would remain an independent company as a new division within Verint.

The source also said the deal would likely be signed in the coming days.
The reported deal comes less than a year after the U.S. private equity company Blackstone Group was reportedly in advanced talks to acquire 40% of NSO for $400 million. Another investor, ClearSky, was expected to join Blackstone as a secondary buyer, for 10%. 

There was no trading in Verint shares on the Nasdaq on Monday due to the Memorial Day holiday in the United States. They closed at $44.05 on Friday, valuing the company at $2.82 billion.

NSO software has stoked controversy in the past when researchers at the Citizen Lab – a group investigating surveillance technology – claimed NSO software was used by the United Arab Emirates to spy on the phone of a human-rights activist and by the Mexican government to illegally target private citizens.

A spokesman for Herzliya-based NSO said in response that the company doesn’t operate its systems once they are sold, and requires customers to use them lawfully “for the prevention and investigation of crimes.”

Pegasus is used by government agencies to gain access to a person’s phone and even take control of it. It is virtually impossible to detect. After it was revealed two years ago that it had infected the UAE activist’s phone, Apple issued a critical software update to protect its users worldwide. 

NSO itself was formed in 2009 by Hulio, Lavie and Niv Carmi, and named for themselves (their first names), although Carmi left the business not long after it was founded. CEO Hulio and Lavie are childhood friends and serial entrepreneurs. NSO employs some 600 people, 200 of them overseas and the rest in Israel. 

Formed in 2002 as a spin-off of the Israeli company Comverse and headquartered in Melville, Long Island, Verint provides software products under the Actionable Intelligence Solutions name, turning structured and unstructured information into insights using machine-learning technology and advanced analytics.  

It claims that over 10,000 organizations in more than 180 countries – including over 80% of the Fortune 100 companies and government agencies worldwide – use its products.

Its Intelligence-Powered Security portfolio, which Verint says is used by 100 countries to neutralize and prevent terror, crime and cyberthreats, would be complemented by NSO’s platform.
Reuters contributed to this report.