The cheers rang out, at first. Inside a day, NICE Systems (Nasdaq:NICE) ( NICE) not only presented a second-quarter report showing its comeback to black ink: it also presented the acquisition of England's Thales Contact Solutions for $55 million.

The acquisition makes NICE a major player in the field of call logging and recording. In a conference call, NICE's CEO, Haim Shani, said the company would now have a 24% market share, leaving its rival Verint Systems (Nasdaq:VRNT) miles behind with a mere 14% of the communications interception market.

"There are too many players in the market," Shani declared, as expected. The first to consolidate will gain an edge, and NICE, happily, is first, he added.

Israel's analysts lined up to agree, perhaps swayed by happy memories of thriving takeovers by other Israeli companies. Comverse Technology's (Nasdaq:CMVT) became a global leader in voicemail through buying competitor Boston Technologies. Teva Pharmaceuticals (Nasdaq:TEVA) has also been growing handsomely through acquisitions. In any case, any news of an Israeli company buying an overseas adversary and becoming a global leader is heartening in these cheerless times.

But a day later, the foreign investment banks started chiming in, and they sounded less adulatory. Goldman Sachs claimed the acquisition "adds execution risk to slowing organic growth" on fears that the units wouldn't mesh. Thales is synergistic but isn't even making money, Goldman pointed out. NICE's estimates seem "aggressive", the bank added.

UBS Warburg's analysts were even more cautious: they see the transaction reaching to $65 million, and meanwhile, Thales has been growing more slowly than NICE and could drag its adoptive parent company down. And that price, that price - not cheap, not cheap at all.

Why did NICE do it? It isn't as though anybody's throwing cash at Israel's hi-tech companies any more, or that shareholders are clamoring for M&A action.

NICE's management says the purchase boosts it a level, by expanding the consolidated company's geographical deployment, and through selling NICE gear to Thales' customers and Thales' gear to NICE's faithfuls.

But there could be another rationale behind the deal, which touches not on its business development, but on its control structure.

NICE is an unusual company on the Israeli scene, in that it lacks majority shareholders. Its original controlling shareholders exited, leaving almost all its shares widely dispersed in the hands of the public and of institutional investors in Israel and abroad.

There are some key shareholders, though. One is Kooras Technologies, run by Israeli businessman Rimon Ben-Shaoul. In May Ben-Shaoul suddenly popped up with 4.6% of NICE's equity in hand and demanded to be appointed the company's chairman. Behind him stood Koor Industries (NYSE:KOR) with a 4.9% stake, offering a practical takeover of the company hand in hand with Koonras.

It didn't work out that way. Aside from Ben-Shaoul crony Yossi Ben-Shalom, none of NICE's directors supported the coup. Koor, plagued by problems of its own as it contended with heavy losses and mounting public pressure, officially withdrew its support from Ben-Shaoul. Ben-Shaoul was appointed a director but not chairman, a job given to Ron Gutler, who runs a hedge fund that invests mainly in non-Israeli bonds. By the way, Ben-Shaoul, Gutler and Koor's CEO Jonathan Kolber all work in the same place, Platinum Building in Tel Aviv.

There haven't been any rumblings of a control battle on NICE's board since then. But nobody could promise Haim Shani, and NICE's other directors and managers, that Ben-Shaoul and Koor wouldn't have another crack at increasing their clout in the company, at guiding its moves and at changing its management.

Which is exactly where the Thales acquisition changes the rules. As it is being carried out using cash and shares, Thales' former owners become the biggest shareholders at NICE with a 14% stake. They also get two directors on the board, which expands from 8 to 10 heads. But Ben-Shaoul and Koor wind up with diluted holdings and less power on the board.

Haim Shani, as the person who sewed up the deal and also agreed to pay full price for Thales, will surely maintain a good working relationship with his new key shareholder, thus substantially bolstering his status at the company and on its board. Buying Thales may have slammed the last nail into the coffin housing a takeover by Ben-Shaoul, the man who would have been chairman.

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