ISRAEL HAS 2020 VISION
As a fertile ground for investment, Israel has been one of the world's stunning success stories. Punching well above the weight of its 9 million population, Israel's position as a frontrunner in innovation and technological prowess has attracted the interest of strategic buyers, venture capital and private equity funds, and 2020 looks set to continue in the same vein.
"2019 was a strong year for Israeli M&A. The volume of deals significantly increased and we saw a record number of transactions ranging from USD500 million to USD1 billion, as well as a number of large scale transactions such as the Mellanox - Nvidia deal, the USD2 billion sale of Habana Labs to Intel and our own, the over USD1 billion sale of Lumenis to funds of Baring Private Equity Asia (BEPA). If I were asked two months ago, I would probably predict that next year will be more of the same," said Doni Toledano, Head of M&A, Banking & Finance at Erdinast, Ben Nathan, Toledano & Co.
"2019 was indeed a very active year for Israeli M&A, mainly in terms of number of deals and not very far from 2018, in terms of deal value" agrees Ran Hai, Partner at Herzog Fox & Neeman, Israel's powerhouse law firm. "We believe that without any adverse unexpected events, such as the Coronavirus, the global M&A market may be more intensive in 2020 than it was in 2019."
Barak Platt, Partner at Yigal Arnon & Co. agrees. "We continue to see a very robust M&A market in Israel. It's astounding, as we speak with people around the world how they are all focused on Israel. Israeli technology is recognized as cutting-edge and many foreign buyers are interested in acquiring Israeli development teams and more developed companies too." His fellow partner, Ezra Gross added: "We expect large corporates and private equity funds will continue to look to Israel for acquisition opportunities and expect many domestic technology companies will continue to look at being acquired as the clearest path to liquidity."
A decade of successive increases in capital invested in Israeli high-tech
In fact, the previous decade saw USD39.1 billion raised, with 2019 seeing a staggering 400% rise in dollar terms since 2010, according to a report by IVC-Zag-S&W. In 2018, Israeli tech firms raised USD6.35 billion in 532 deals, and in 2010 Israeli tech firms raised USD2.1 billion in 319 deals. VC-backed deals totaled a record amount of USD6.4 billion in 2019 compared to USD4.75 billion in 2018 and USD1.13 billion in 2010. Deals with VC participation captured 60% of the total number of deals in 2019. The dollar volume of deals in which VCs took part captured 77% of the total raised in 2019. "VC activity in Israel remains extremely strong. Once upon a time, Israel was known for excellent early-stage technology companies and more modest valuations compared to its Silicon Valley counterparts," adds Gross. "Now, there are more mature, developed companies, including many unicorns."
Daniel Turgel, Partner in the Global Mergers and Acquisitions practice of White & Case agrees. "I have seen a recent influx of venture capital funds coming into the market, including European funds that are exploring the horizon for the first time."
Israel is becoming a hardcore technology hub for big global tech companies
"Israelis are becoming more mature and having more patience, having learned to wait and get to a higher valuation," adds Eyal Orgad, Partner in the New York office of Latham and Watkins, which leverages its global reach to provide strategic advice to Israeli clients on some of the highest profile and highest value M&A transactions in the Israeli market. Colleague and London Partner, Joshua Kiernan adds: "Israel is becoming a hardcore technology hub for big global technology companies to come in and buy new technology because Israel has a great reputation in terms of its technological development. That's driving higher valuation. There's been an explosion of unicorns in Israel that we've never seen, and those companies they are looking to raise big investment rounds, and that is attracting more and more foreign VC's and growth funds. We are also seeing more and more Israeli companies shifting their center of gravity and their headquarters to the U.S. - so they can be closer to their customers. Top management has moved to the U.S. and as a result, they are inevitably gaining more attention from the big VC funds in the U.S. because they're physically on the ground."
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