Cross-border Mergers and Acquisitions Deals Soared in 2013

Foreign firms spent $6.5 billion on Israeli companies last year. Waze, Trusteer and Retalix topped the list, by price.

Foreign companies spent $6.45 billion buying Israeli firms in 2013, up 20% from 2012, accounting firm PwC Israel Kesselman & Kesselman said in a report this week. Most of that sum was for a small number of mega-exits in high-tech.

The year’s biggest mergers and acquisitions deals were Google’s purchase of navigation app startup Waze, for around $1 billion, NCR’s acquisition of supply-chain software Retalix and IBM’s acquisition of security software developer Trusteer. The combined value of the top five M&A transactions in 2013 was $3.3 billion, compared to $2.3 billion in 2012, PwC Israel said.

While the average deal size increased 48% from 2012 to $90 million last year, the number of M&A deals involving Israeli companies either as buyers or acquisition targets dropped to 120 from 165, PwC Israel figures showed.

A combination of exuberance in the capital markets — share prices in the United States and Europe reached record highs in 2013 — and buyers’ preference for more mature, hence more expensive, technology companies, was behind the steep rise in the size of the deals, said Liat Enzel-Aviel, group leader for PwC Israel’s consulting practice and head of transaction services. “Nevertheless, the high valuations increased the gap between sellers’ and buyers’ expectations, reducing the number of deals,” she added.

Meanwhile, acquisitions by Israeli companies of foreign firms increased last year by 42%, to $1 billion, mainly due to acquisitions in real estate and hotels. Two transactions stood out — the Fattal Group’s $350 million purchase of European hotel properties and the Aloni Hetz Group’s investing a similar amount in the U.S. real estate fund Carr Properties.

The one area where there was a marked decline in M&A activity was transactions inside Israel. The value of M&As between Israeli companies plummeted 55% last year from 2012 to just $755 million. However, PwC noted that the 2012 figure was inflated by Shlomo Eliahu’s $900 million acquisition of Migdal Insurance; without it, the value of domestic M&As would have been unchanged.

All told, M&A deals involving Israeli companies rose 5% last year compared to 2012 to $8.3 billion, according to the report.

Enzel-Aviel said 2014 also was set to be another banner year for mergers and acquisitions. “Foreign companies will continue hunting for the next new technology and the Israeli market is a natural magnet,” she said.

She cited the improvement in the U.S. economy combined with the enactment of Israel’s Business Concentration Law, which will spur holding companies to divest assets, and sell-offs by insolvent companies as factors likely to spur M&A activity outside the high-tech and life sciences sectors.

Omer Shubert