NICE Systems Deal Finalized, Name Changed to Qognify

The video analytics software specialist accepted an offer from Battery Ventures and will now focus more on mining Big Data.

BOSTON – Israeli software provider NICE Systems is selling its physical security business unit (PSBU) to private equity firm Battery Ventures for up to $100 million, its second divestment in three months as it focuses more on its data analytics business.

Update, Sept. 22: NICE has changed its name to Qognify.

According to officials with NICE, which provides analytical software that enables companies to spot fraud and fend off security threats, the company will receive $85 million in cash and as much as $15 million based on future performance.

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Based near Boston with offices in the Silicon Valley, San Francisco and Herzliya, Israel, Battery Ventures is a technology investment firm holding several software companies focused on IT security and industrial safety. The NICE business unit, which will be renamed, marks the firm’s first pure-play physical security company acquisition.

Battery Ventures General Partner Jesse Feldman tells SSI the firm will operate the PSBU as a standalone company by maintaining its focus on the physical security market, while expanding its solutions for daily operations management. Feldman also said the firm will complement the PSBU’s existing technology through highly strategic acquisitions, including software-based access control.

“I think about the physical security space in a fairly broad context, in terms of mainstream security applications as well as broader situation management and operations. I think of all that holistically as a broader physical security solution set,” Feldman says. “Within that context with think there is a very nice organic growth opportunity for the [PSBU], particularly given its core strengths and assets. We have excellent technology products.”

Feldman says the PSBU portfolio, including video analytics, physical security information management (PSIM) and situation management systems, will strictly remain a provider of software-based solutions.

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“We are not going to expand into the hardware side of the business. That being said, we certainly do think there is an interesting opportunity to continue to expand the product portfolio on the software side,” he explains. “That certainly will be in the form of continued investment in R&D and organically developing new software products as well as potentially looking at some acquisitions.”

Along with access control, there are two other specific areas of acquisitions that Battery Ventures would consider as priorities, Feldman says, namely video analytics and situation management. 

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Moti Shabtai, NICE’s current general manager of the PSBU, will become group president of the newly created company. He will be joined by Adam Markin, an experienced industry operator and Battery executive-in-residence, who will serve as chairman.

“PSBU has been a visionary in this market for years, and we will continue the division’s track record of innovation,” Shabtai says. “Battery will strive to help PSBU achieve the company’s potential as well as long-term business objectives, providing PSBU with access to additional capital, extensive transaction experience, and broader industry relationships to help accelerate growth.”

The newly created company will be headquartered in New Jersey with additional offices in London and Singapore, and an R&D center in Israel. Battery’s private equity practice, which has a global emphasis, has experience with operations in the United States, Europe, Israel and Asia.

The sale of NICE’s physical security business unit (PSBU) is scheduled to close during the third quarter of this year and trim overall 2015 revenue by around $70 million. NICE Systems CEO Barak Eilam tells Reuters the deal completes a strategic plan started a year ago to “divest less synergetic and less profitable companies.” In May, NICE sold its cyber and intelligence division to Israeli defense electronic firm Elbit Systems for up to $158 million.

Moving forward, NICE will mostly concentrate on mining Big Data to drive growth. A smaller contribution will come from a business that sells financial crime and compliance products to banks and insurance to fight fraud and money laundering.

Eilam tells Reuters that while NICE is focused on organic growth, it would remain active in mergers and acquisitions. “We are in a great cash position and have the ability to do acquisitions,” he says.

NICE said it expects the divestiture to be non-dilutive to earnings in 2016.

About the Author

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Although Bosch’s name is quite familiar to those in the security industry, his previous experience has been in daily newspaper journalism. Prior to joining SECURITY SALES & INTEGRATION in 2006, he spent 15 years with the Los Angeles Times, where he performed a wide assortment of editorial responsibilities, including feature and metro department assignments as well as content producing for latimes.com. Bosch is a graduate of California State University, Fresno with a degree in Mass Communication & Journalism. In 2007, he successfully completed the National Burglar and Fire Alarm Association’s National Training School coursework to become a Certified Level I Alarm Technician.

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