U.S. fund sells Israeli hacking firm NSO Group amid spy mystery
The founders of Israeli spyware company NSO Group bought the firm back from U.S. private equity firm Francisco Partners, with support from Novalpina, a European private equity firm, and New York investment bank Jefferies Group. The sale follows a highly turbulent month for the controversial cyberweapons firm, whose powerful spyware, Pegasus–capable of taking over smartphones–has been used by a number of governments to target dissidents, journalists, and lawyers.
In recent weeks, news reports have detailed ties between Israeli intelligence firm Black Cube and an investigation into critics of NSO. In January, Citizen Lab, a digital rights watchdog, foiled a Black Cube-linked spy who was trying to glean information about investigations into NSO Group, but also bait researchers into making racist and anti-Israel remarks. Black Cube, which worked on behalf of Harvey Weinstein in an attempt to discredit his accusers, used similar tactics on lawyers handling lawsuits against NSO Group and against a London-based journalist covering the litigation. Black Cube and NSO have denied any involvement in the operation.
Specific terms of the deal weren’t disclosed, but the acquisition includes an investment of about $100 million by the co-founders, and reportedly values the company at nearly $1 billion. San Francisco-based Francisco Partners bought a 70 percent stake in NSO Group in 2014 for a reported $120 million.
In recent years, the private equity fund had been trying to sell the company without success. During that time, NSO Group’s troubles mounted, as Citizen Lab found that NSO’s software had been used by the United Arab Emirates to target the phone of now-imprisoned human rights activist Ahmed Mansoor. In 2018, Citizen Lab, working with international researchers, found that NSO spyware was being used by governments in Mexico, Panama, and other countries.
More recently, Montreal-based Saudi dissident Omar Abdulaziz filed a lawsuit against NSO Group alleging that its software had been used to spy on murdered journalist Jamal Khashoggi. (NSO has denied that its software was involved.) In 2018, NSO’s software was also found on the phone of a staffer at Amnesty International, a human rights group that is a regular critic of NSO Group’s corporate ethics.
Francisco Partners’s sale of NSO Group comes amid continued fallout from Black Cube’s surveillance. As Fast Company recently learned, lawyers and other individuals targeted by Black Cube intend to file lawsuits in the United Kingdom, Cyprus, and Israel against the firm, after an Israeli TV station reported on its role.
Francisco Partners did not respond to a request for comment. In a statement emailed to Fast Company, NSO Group said that the deal would help improve technology to “help our customers reduce the threats from terrorism and crime.” The firm, founded in 2009, said that in 2018 it had revenues of $250 million and “dozens of licensed customers.”
In July, cofounders Shalev Huio and Omri Lavie had previously discussed merging NSO with the security division of U.S.-based Verint Systems for about $1 billion, but no deal was reached. In 2017, Blackstone Group was said to be in talks to buy part of NSO at a similar valuation, but those talks failed a month later, Reuters reported.
In 2016, Francisco Partners hired White House national security adviser Lieutenant General Michael Flynn to advise the firm as well as an NSO Group offshoot, OSY Technologies. Flynn, who pled guilty to lying to the FBI about his conversations with the Russian government, was paid a total of about $140,000 for what Steve Eisner, the general counsel of Francisco Partners, said was relatively limited advisory work. Flynn’s work with Francisco and OSY took place while he was working with the Trump campaign.
In a statement about the NSO deal, Eran Gorev, operating partner at Francisco Partners and Chairman of NSO Group, applauded the company for implementing a “best-in-class business ethics framework and bringing in independent experts to ensure the company was operating in accordance with the highest ethical standards.”