M&A Deals for Israeli Startups Reach $6.45 Billion in 2013

Including sales of stock to the public, the eight-year high swells to $7.6 billion. But the industry is divided on the outlook for 2014.

The value of mergers and acquisitions of Israeli high-tech companies set an eight-year high of $6.45 billion in 2013, as the average exit swelled by more than 50%, accounting firm PricewaterhouseCoopers Israel said this week.

The value of M&A deals rose 16% over 2012, PwC said. Adding in initial public offerings, there were 45 high-tech exits in 2013 worth $7.6 billion. The average exit was for $170 million, the highest in decades and an increase from $111 million in 2012 and $81 million in 2011. The average IPO was for $198 million, while the average M&A deal was for $165 million, PwC said.

This year has been the best for Israeli startups since the global technology bubble burst more than a decade ago. While the $1 billion sale of crowd-source navigation firm Waze to Google made the most headlines, there were several exits in the hundreds of millions of dollars, not to mention the stock market debut of Wix, a maker of website-building tools.

But people in the industry are divided on whether 2014 will shine as bright.

“The year 2014 is going to be a record one for Israeli high-tech, more than this year,” angel investor Tal Barnoach told TheMarker. An angel investor since 2011 after a 17-year career as a startup entrepreneur, Barnoach has been behind companies such as synchronization software firm BeInSync and interactive TV startup Orca Interactive. He has invested in 13 companies as an angel investor.

“I think more than one company from the young crop of Internet firms will reach $1 billion,” he said. “This is good news both for the industry and the country. We’re finally creating jobs, and exits are generating tax revenues.”

But Rubi Suliman, the lead technology-practice partner at PwC Israel, was more cautious. “It will be hard to beat the results from 2013, but ... a decent number of offerings could make 2014 another record year,” he said.

According to Suliman, a lot depends on the global economic environment. This year exits enjoyed good timing, especially tech offerings in the United States, he said. Also, many Israeli high-tech outfits matured.

“History shows that the window of opportunity for M&A deals opens and closes given global events much larger than the Israeli high-tech industry,” Suliman said. “Since the atmosphere in the acquisitions market isn’t under our control, the most important element for the Israeli high-tech market is that there be an abundance of companies at the necessary level of maturity.”

To be bought up at a generous valuation, it’s better to have proved your technology and achieved significant sales, he said.

Still, in 2013, there were fewer exits, a downtrend under way since 2011, PwC noted. The most prominent IPO of the year was Wix, which raised $127 million on the Nasdaq at a market value of $765 million. Its market value is now above $1 billion.

The largest number of M&A deals by industry this year was in life sciences, with the total deal size reaching $2.5 billion, including IPOs. The average exit size was $190 million.

Exits in the Internet segment surged to $2.1 billion from $554 million in 2012, with the average exit climbing to $238 million from $55 million. But the number of exits in the Internet industry was unchanged.

Alon Ron