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USD5.29 billion in exits for Israel’s high-tech industry in H1 2015

In the first six months of 2015, Israeli high-tech exit activity accelerated, garnering USD5.29 billion in 54 deals – nearly 76 per cent of the total proceeds from exits in all of 2014, with 107 deals totalling USD6.98 billion, and 80 per cent of USD6.62 billion in 91 exits in 2013, both considered part of the few most successful years for Israeli exits. 

The figures published are part of the IVC-Meitar Exits Report H1 2015.

The average deal size in H1/2015 was USD98 million, 51 per cent more than the annualised average of USD65 million in 2014 and 34 per cent above USD73 million in 2013. The average VC-backed exit in H1 2015 totalled USD84 million, a 15 per cent increase from the 2014 average, while non VC-backed exits jumped 80 per cent from an average of USD60 million last year to USD108 million in the first half of 2015.

Dan Shamgar, partner at law firm Meitar Liquornik Geva Leshem Tal, says: “The first half of 2015 featured robust M&A activity across the industry, and the second half is already looking promising, with a pipeline of meaningful transactions in the works. We are experiencing growth both in the number and variety of potential buyers showing interest in Israeli companies, and in the variety of target companies – that are more mature and ambitious. In addition, investors in Israeli companies continue to be selective in defining the exit path and are willing to be patient in order to maximise value. We are optimistic about H2/2015."

Almost 24 per cent of the total exit value in H1/2015 was due to the USD1.25 billion acquisition of FundTech, an enterprise applications company, by multinational fintech company D+H. Five out of the ten largest acquisitions (all greater than USD100 million) were software-related. 

The report revealed that M&A deals accounted for a significant part of the H1/2015 increase in exits. Proceeds from mergers & acquisitions of Israeli and Israel-related high-tech companies in H1/2015 totaled USD4.98 billion in 48 deals, exceeding the 2014 aggregate of USD4.93 billion, partly due to the FundTech acquisition. In terms of the number of deals, H1/2015 totalled 55 per cent of the annual average M&A deal-making in the previous five years. (Chart 2)

The average M&A deal was the highest in six years, at USD104 million, second only to 2012, when Cisco Systems acquired NDS for USD5 billion. Deals in the USD100-500 million range accounted for 54 per cent of M&A proceeds in H1/2015, explaining the high average, unlike 2012 figures, when the exceptional NDS deal accounted for the increase in total proceeds.

Koby Simana (pictured), CEO of IVC Research Center, says: “In the first half of 2015 we saw company valuations at exits rising significantly and quickly, with 11 deals above USD100 million each, compared with 17 such deals for the full year 2014. Such high-value deals are clear evidence of the availability of more acquisition capital, as well as of the fact that more companies and investors have been working on growing companies longer, thus providing the market with more mature potential acquisitions, which receive better, higher valuations. On top of that,” he adds, “we've been tracking more and more international technology companies and conglomerates from markets outside the US – particularly Asian and European corporations – who join the expanding pool of potential buyers of Israeli high-tech companies. Such new players are bringing with them an influx of new capital and growing international interest, driving up company valuations even further.” 

Israeli high-tech IPO activity has continued, with six companies going public. The direct proceeds from the IPOs were somewhat modest, at USD308 million, only six per cent of total exit proceeds in H1/2015, compared with USD2.1 billion (29 per cent share) raised in 16 IPOs in 2014 as a whole. Only two of the six companies that went public were venture-backed, compared with 2014, when more than half of the IPOs were by VC-backed companies.

While IPO activity to date peaked in 2014, more than 20 Israeli companies are currently planning to go public in 2015 – 2016, and three to four IPOs are scheduled to take place by the end of the year, for a total of up to USD500 million.

The IVC-Meitar Exit Report also reveals that acquisition activity by Israeli high-tech companies continued in H1/2015, with 24 Israeli high-tech companies closing a total of 32 acquisition deals of both local and foreign companies in order to fuel expansion efforts. 

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