US private investment firm AE Industrial Partners will acquire Israeli cyberattack firm Paragon Solutions, sources familiar with the matter told Globes. Paragon was founded by former IDF 8200 intelligence unit commander Brig. General Ehud Shneerson (re) and former Prime Minister Ehud Barak. AE will pay an estimated $900 million. Half will be in cash and the other half will be future milestone payments.
The $450 million, which will be paid immediately, will be split between Paragon’s 400 employees (20%) and the company’s five founders (30%). Mr. Shneerson, who serves as Chairman, Mr. Idan Nurik, Mr. Igor Bogdorov, Mr. Riad Abraham, and Mr. Rilan Elkayam, CEO. The other half will go to investors at Battery Ventures, a U.S. venture capital fund, and Red Dot, an Israeli venture capital fund, although Red Dot last week estimated another portfolio company, cybersecurity firm Perception Point. It was acquired for $100 million to $200 million.
Ehud Barak is estimated to own a small percentage of Paragon stock, worth between $10 million and $15 million before taxes. His involvement in the company as one of the entrepreneurs had heightened buyers’ concerns that the Israeli establishment, citing hostility toward Barak, would disapprove of the deal for political reasons. Paragon operates under the close supervision of Israel’s Ministry of Defense, which in the past opposed the sale of cyberattack firm NSO Group to U.S. defense firm L3 for security reasons. As far as is known, the Paragon Agreement has not even been considered by the political establishment and was approved by senior Defense Ministry officials several weeks ago.
AE, “Globes” has learned that it plans to merge the Israeli company into its portfolio cyber company REDLattice, a defense integrator that establishes custom-made projects for the US Department of Defense and English-speaking countries. The deal will allow Paragon to expand its market reach not only in the United States but also in countries such as the United Kingdom, Ireland, Australia, New Zealand and Canada. Paragon will continue to operate in Israel as an Israeli company, but the deal includes a clause allowing it to export cyberattack technology to the United States, people familiar with the matter told Globes.
Francisco Partners partner and former NSO CEO Eran Gorev invested in Paragon when it was founded. However, Golev sold his stake several years ago and would not benefit from his exit even if the deal were to go through.
According to IVC Research, $30 million was invested in Paragon Solutions in the early 2020s.
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Paragon has developed software that can extract data from encrypted apps
Paragon has developed Trojan horse software called Graphite that can extract data from encrypted messaging apps such as WhatsApp, Facebook Messenger, Signal, and Telegram. Unlike other Israeli cyberattack companies such as NSO and Candiru, Paragon Solutions minimizes privacy invasions, works with security authorities and local legal systems, and operates in 34 countries defined as democratic. It was initially established with US investment for the purpose of operating solely in the United States.
In contrast to NSO’s Pegasus software, Paragon’s software does not take a photo of the user with the phone’s camera, nor does it use the phone’s microphone as far as is known, and only records audio conversations in chat applications. I will. The company, which began selling its products in the United States about two years ago and whose customers include the U.S. Drug Enforcement Administration (DEA) and Singapore’s security agencies, said a report on the Intelligence Online website. It is said to be replacing technology from an Israeli company. Blacklisted in America.
Globes, Israel Business News – en.globes.co.il – Published December 16, 2024
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