Technology company and defense contractor L3Harris Technologies Inc. has reportedly ended talks to acquire some or all of the controversial Israeli spyware maker NSO Group Ltd.

L3Harris was first reported to be in talks with NSO on June 14, although what it attempted to acquire was unclear. One report suggested that L3Harris was interested in acquiring only NSO’s surveillance technology, while other reports suggested that the deal was to acquire all of NSO Group.

As noted at the time, a deal for all or part of NSO would not be as simple as the two companies agreeing to terms, requiring permission from both the U.S. and Israeli governments.

NSO Group, with its Pegasus spyware, has been one of the most controversial cybersecurity companies of recent times. Pegasus is a form of software that uses zero-day or unpatched exploits to infect mobile devices. It was allegedly used to hack about 1,400 WhatsApp users using U.S. servers, according to a lawsuit filed in 2019. Other incidents have seen Pegasus used to target journalists and activists.

The use of Pegasus software prompted the Commerce Department to sanction the company in November.

Pushback against the proposed deal ultimately scuttled the talks. According to The New York Times, White House officials were reportedly outraged to learn about the negotiations and that any attempt by an American defense contractor to purchase a blacklisted company would be met by serious resistance.

The Times claims that days later, L3Harris, which is heavily reliant on government contracts, told the Biden administration that it had scuttled its plans to purchase NSO. However, it is noted that there have been several attempts to resuscitate the negotiations since.

Neither L3Harris nor NSO Group has confirmed the report. The Times only references government officials and people familiar with the matter.

The net result of L3Harris walking away from negotiations in light of government pushback is not surprising, but there is a twist to the story. It’s claimed that American intelligence officials quietly supported the plans to purchase NSO. They allegedly did so because the technology would have been of intense interest to intelligence and law enforcement agencies such as the Federal Bureau of Investigation and the Central Intelligence Agency.

The deal falling apart may also leave NSO in a difficult situation. With the blacklisting in place, the company is limited in whom it can sell Pegasus to and what technology it can purchase. In contrast, an acquisition by an American company could have resulted in the blacklisting being lifted.

Image: NSO Group