Israeli offensive cyber company Paragon will be acquired by the U.S.-based private equity fund AE Industrial Partners for an initial payment of $500 million, with an additional $400 million contingent on meeting business milestones. Despite the acquisition, Paragon will remain an Israeli company, adhering to regulatory guidelines set by Israel’s Defense Ministry and the U.S. government.
Paragon’s management team and employees will stay in place, with plans to expand into new markets, launch innovative products, and recruit approximately 150 additional employees in the coming months.
The deal will significantly benefit Paragon’s founders, including former Prime Minister Ehud Barak, company chairman Ehud Schneorson (a former commander of IDF Intelligence Unit 8200), CEO Idan Nurick, Igor Bogdalov and Liad Avraham. The founders are expected to collectively receive about 30% of the initial payment, or approximately $150 million. Barak, holding a small equity share, is estimated to receive around $15 million. Employees will also benefit, collectively receiving about $100 million through the company’s generous stock option policy. The remaining funds will go to the company's investors.
A strategic partnership with global implications
Paragon, one of Israel’s two leading offensive cyber companies alongside NSO, specializes in technologies classified as weapons, requiring export approval from the Ministry of Defense. Unlike NSO, which faced international backlash for selling spyware to authoritarian regimes and which was blacklisted by the U.S. government, Paragon was founded under a mandate to operate exclusively in democratic nations. This ethical approach paved the way for the current deal.
According to a source familiar with the transaction, the acquisition aims to establish Paragon as a global leader in cyber technologies. The partnership serves as a bridge between the Israeli and U.S. cyber ecosystems, with operations fully coordinated between the two governments. This ensures no regulatory conflicts over the transfer of knowledge or personnel between the Israeli and American branches.
Under the agreement, Paragon will retain influence over client selection, preventing any U.S. national security interests from overriding its ethical standards. This provision could face challenges depending on the policies of future U.S. administrations regarding offensive cyber exports to non-democratic states.
Regulatory delays and strategic alignment
The deal, initially outlined in June, was delayed by regulatory negotiations between Israel and the U.S. but received final approval on Sunday. AE Industrial Partners will acquire Paragon through its subsidiary, Red Lattice, which operates in North America and other regions. Paragon will leverage Red Lattice’s existing relationships to expand its footprint in new markets while continuing to operate independently in its current territories.
The agreement ensures that Paragon’s leadership will remain at the helm for several years, tasked with achieving set business goals to maximize the company’s value under AE’s ownership.
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Some industry experts argue that retaining independence would have been preferable for Paragon, but others see the partnership as essential for survival in the heavily regulated world of offensive cyber.
"In this industry, regulatory authorities wield immense power. Aligning closely with both Israeli and American regulators ensures the company’s longevity and shields it from unilateral decisions that could dismantle it," said one source.
For AE Industrial Partners, the acquisition represents an opportunity to strengthen its cyber portfolio while ensuring compliance with strict oversight, setting the stage for Paragon’s continued growth in a highly competitive and ethically sensitive field.