Israeli High-tech Exit Activity Doubles in 2017 Following Slow Start

M&A deals and initial public offerings reach $7.4 billion, not counting the giant Mobileye and NeuroDerm acquisitions

Argus Cyber Security

After getting off to a slow start in the first half, the number of high-tech exits in Israel more than doubled in value for all of 2017, even after discounting two of the year’s biggest deals, a report by the accounting and consulting firm PwC Israel showed Wednesday.

The total value of exits, including merger-and-acquisition deals and initial public offerings, reached $7.4 billion for the year, up 110% from 2016’s modest $3.5 billion, PwC said. The number of exits rose to 70 from 55, with the average exit worth $106 million versus $64 million in 2016.

The 2017 figure didn’t include the sales of the auto-tech company Mobileye to Intel and the pharma company NeuroDerm to Mitsubishi Tanabe Pharma, which would have lifted the  2017 figure to $23.9 billion. Both companies were publicly traded and their IPOs had been counted as exits the years they occurred.

Yaron Weizenbluth, the PwC partner responsible for the firm’s high-tech practice, attributed the growth in exit activity this year both to global trends that favored M&A activity and the increased “maturity” of Israeli startup entrepreneurs.

“Previously, local players set their sights on a quick exit, but this appears to have changed in 2017, reflecting more than anything a more mature mindset of local technology firms,” he said. A third of the exits were over $100 million, twice the rate in 2016.

Let's make a deal Israeli exit activity in 2017

Weizenbluth noted that several Israeli tech companies, including ride-hailing service Gett and data-management software maker Radware, acquired firms, bringing the total level of acquisitions in 2017 by Israeli companies to $400 million.

Weizenbluth said the first half of the year – when exit activity reached a paltry $1.9 billion, no better than the limp pace in 2016 – was shadowed by China’s clampdown on overseas investment and the wait for the Trump tax reforms to be approved by Congress.

But the “positive forces” that existed, like low interest rates and abundant capital, came to the fore in the second half, when exit activity grew to $5.5 billion, Weizenbluth said.

The number of IPOs grew to 11 from just two in 2016 and their value from $44 million to 1.46 billion, led by cybersecurity company ForeScout’s raising $116 million at an $800 million valuation, according to PwC. Israeli companies, which traditionally have gone public on the Nasdaq, opted for a wide range of stock exchanges including Sweden’s, Singapore’s, Australia’s and Britain’s this year.

But M&A remained the preferred exit route in 2017, accounting for some 80% of all exits by value, or a total of just under $6 billion, PwC said.

Weizenbluth said he was optimistic that the second-half trends would continue into 2018, noting that about half the buying companies in this year’s M&A deals were new players on the Israeli scene.

“It's hard to predict whether another success in the magnitude of Mobileye is possible over the next few years, but don’t overlook the fact that more global corporations now choose Israel as the place where they can buy the right technologies to help them shape their futures,” he said.