Paragon, an Israeli spyware maker that has largely kept a low profile in recent years, was acquired last week by American private equity giant AE Industrial Partners, according to Israeli news reports.
Tech news website Calcalist reported that the investment firm bought Paragon for $500 million, and depending on how the company grows, the deal could reach $900 million. Globes reported that the upfront payment is $450 million, 20% of which will go to Paragon’s 400 employees, and 30% to the five co-founders, with the remaining 50% going to U.S. venture capital fund Battery Ventures and Israeli venture capital fund Red Dot.
In 2021, Forbes first revealed the existence of Paragon, which didn’t — and still doesn’t — have a website. The magazine reported that the company was founded by a group of former Israeli intelligence officers: Ehud Schneorson, former commander of Unit 8200, a renowned Israeli spy agency whose alumni often then work in the cybersecurity private sector; as well as CEO Idan Nurick, CTO Igor Bogudlov, and vice president of research, Liad Avraham.
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AE Industrial did not respond to TechCrunch’s request for comment about the reported deal.
Nurick and Avraham did not respond to a request for comment sent via LinkedIn. Bogudlov and Schneorson could not be reached for comment.
Battery Ventures spokesperson Rebecca Buckman declined to comment. Red Dot did not respond to a message requesting comment.
Forbes reported in 2021 that Paragon offered services to hack phones that allowed access to apps on a target’s phone, such as WhatsApp, Signal, Facebook Messenger, and Gmail. Paragon’s spyware product, called Graphite, has been likened as a competitor of Pegasus, made by NSO Group, and other similar spyware products.
In October, Wired reported that U.S. Immigration and Customs Enforcement had signed a one-year contract worth $2 million with Paragon to acquire a “fully configured proprietary solution,” which included licenses, hardware and warranties, maintenance and training. Last month, The New Yorker cited a Paragon source who said that the ICE deal came after a vetting process in which Paragon reportedly demonstrated that it had controls in place to prevent customers in other countries from hacking U.S. residents.
This has been an ongoing issue with NSO Group, which has been accused of providing tools to countries that then targeted American citizens, including U.S. Embassy employees. It’s in part because of these alleged hacks that the U.S. Department of Commerce put NSO Group on an economic blocklist in 2021, effectively banning U.S. companies from trading with the company. The U.S. government has taken similar steps, including sanctions, against spyware maker Intellexa.
By acquiring Paragon, AE Industrial follows the example of other Western investment firms investing in Israeli spyware makers. In 2014, U.S. private equity firm Francisco Partners paid $130 million to acquire 70% of NSO Group’s shares, Calcalist reported at the time. The same year, Francisco Partners were in contact with the now-defunct Italian spyware firm Hacking Team, according to leaked emails from the company, which were stolen and then published online by the notorious hacktivist Phineas Fisher.
In 2019, two of NSO’s founders Shalev Hulio and Omri Lavie, bought the company back from Francisco Partners, re-gaining control of it.
