Israeli high-tech M&A rose 44% to $7.2 billion in 2015, the highest level since 2006, but IPOs were down as fewer companies chose to go public, according to PwC Israel.
The number of initial public offerings fell to eight this year, valued at $3.5 billion, compared with 18 worth $9.8 billion in 2014, when one company alone, Mobileye NV, raised $5.3 billion.
In contrast, the number of M&A deals rose to 62 from 52. The most active buyer was Microsoft with five acquisitions in 2015.
“This increase is driven by continued appetite by large multinationals to use their massive cash holdings to acquire innovative future technologies,” said Rubi Suliman, head of high-tech at PwC Israel.
“Israeli high-tech continues to provide investors with an impressive string of exits, with total deal value of more than $5 billion for the fifth straight year,” added Suliman.
The decline in Israeli IPOs was driven by several factors. The window of opportunity has been closing in the US and the UK, and cheaper private funding decreased Israeli companies’ interest in more costly IPOs.
“When the public markets do not give the higher valuation, the number of IPOs is set to go down,” he said, adding that M&A activity was expected to remain strong in 2016.
“Israeli hi-tech remains a focal point for international M&A deals,” he added. “We have grown accustomed to the presence in Israel of global giants like Facebook, Apple, IBM, Qualcomm, Microsoft, Intel and more, which is actually far from being obvious. This year we have seen some new players in the local M&A market such as ARM, Amazon and Zynga. Israeli companies, such as Checkpoint, Mellanox, ironSource and Wix are also actively or potentially in on the action. The most active buyer by far is Microsoft with 5 acquisitions in 2015. In 2015, 56 buyers acquired 62 companies, versus 49 buyers that acquired 52 companies in 2014.”
“While ranked top in terms of the number of delegations to Israel and interest they show, the Chinese are still on the sidelines and have not made significant acquisitions of Israeli hi-tech companies,” Suliman commented. “However, the Chinese do make investments in Israeli high-tech, and have made quite a few acquisitions in other industries, so it’s possible to assume that it is a matter of time before they get into the game.”
According to PwC, the amounts currently invested in Israeli high-tech are unprecedented, and it seems that this will bear fruits in the form of more innovative companies that will keep Israeli hi-tech rolling forward.
“The bottom line is that at this juncture, Israeli high-tech has all ingredients to continue producing larger than ever exits,” says PwC.