- Only one IPO took place in H1/2016
- Israeli acquisitions in the local market totaled $916 million
- Total exit proceeds in H1/2016 reached 41% of total annual exits for 2015
- Buyout totals in H1/2016 at 73% of buyout proceeds in 2015
Israeli high-tech exits totaled $3.32 billion in the first half of 2016, with 45 deals, according to the IVC-Meitar Exits Report, published today. The average exit deal reached $74 million in H1/2016, three percent above the annual exit average of $72 million in 2015. Four buyout deals accounted for an additional $878 million, hiking up total dollar billions to 4.19 in total proceeds and setting the total average deal (with buyouts) at$86 million, nearly 12 percent above 2015’s $77 million total average deal.
The largest deals in the first half of 2016 were the $811 million acquisition of EZchip by Mellanox and the $643 million buyout of Xura, followed by the $430 million acquisition of Ravello Systems by Oracle. The top three deals accounted for 57 percent of total exit deals.
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As international IPO markets were unfavorable since late 2015, it is no surprise that 2016 has so far seen only a single IPO, that of trendIT, which raised $5.9 million at a $17.6 million valuation, on the London Stock Exchange. H1/2016 IPO data reflect a whapping 99 percent drop compared to $609 million in IPOs in 2015.
Adv. Dan Shamgar and Adv. Alon Sahar, noted: “It is impossible to ignore the decrease in the number of deals in the first half of 2016. This was expected due to a number of trends in the technology markets, mostly in the US and partly in China, as early as the end of the previous year. As opposed to Israel, the last quarter of 2015 featured an overall slowdown in technology companies’ activity, especially a decrease in capital raising in the United States (both in the private sector and public markets, the latter coming to an almost complete halt). The decrease in private companies’ valuations, along with share price fluctuations in the United States and China, led to cautious behavior, most prominently to the now-evident hesitation by acquirers. A gap was created between the expectations of buyers and sellers, partially in light of capital raising deals performed by a significant number of companies, which were potential acquisition targets. The gap between the bid and asking prices may not be as large as it had been during the 2008 crisis, but it still managed to halt exit processes, except for deals that were already in advanced stages. We expect this slowdown to continue in the second half of 2016 as well.”
Yet, the report editors explain the while data so far show a slight drop in exit numbers, such a drop is typical of first year-halves, and in line with the average annual rates in the past six years. It is estimated that by the end of 2016, at least 100 exit deals, with a total of approximately $7 billion in total proceeds, will have closed – 13 percent below the proceeds generated by 111 deals in 2015.
Koby Simana, CEO of IVC Research Center, says: “We don’t think that 2016 figures will be dramatically different than in previous years. That being said, our projections reflect a decline in exit volumes since we believe companies are using the current market atmosphere to focus on growth rather than exit. Not only are there more companies seeking growth these days, but it seems investors are also more inclined that way, if the relative ease of raising capital for Israeli high-tech companies in growth stages is any indication. We will be publishing the capital raising statistics soon, but I can already confirm that capital raising is on the rise.”
As Israeli high-tech companies mature and grow, more companies are able to expand by utilizing capital raised or earned by acquiring other companies. In fact, the largest M&A deal closed in 2016 so far was Israeli through and through – and was not only the largest exit for EZchip, but also the largest acquisition by an Israeli company, Mellanox. A total of nine such deals were recorded since the beginning of the year, for a total of $916 million. However, most Israeli acquirers directed their acquisition efforts to international markets, with $1.2 billion spent on acquisitions of foreign companies, in 21 deals.
According to the report’s editors, in the past three years, Israeli high-tech companies have expanded their activity in the local market, and the volume of deals where both parties were Israeli has grown considerably. In addition, the Israeli Tax Authority and the Ministry of Finance are considering introducing tax incentives that will benefit Israeli companies conducting M&As, according to a memorandum of law submitted to the Ministerial Committee of Law Affairs. Therefore, the editors believe that, towards the end of 2016 or beginning of 2017, there will likely be an increase in the number M&A deals in the local market.
Chart: Israeli High-Tech Exits by Type: IPO, M&A and Buyouts 2011-H1/2016 ($B)
