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2015 Israeli tech exits could beat record, report shows

In just half a year, technology firm IPOs and acquisitions added up to more than 75% of 2014’s total, says industry group

Chart shows the level of Israeli exit activity in recent years (IVC-Meitar Exit Report)
Chart shows the level of Israeli exit activity in recent years (IVC-Meitar Exit Report)

In just the first six months of 2015, exits in the Israeli high-tech economy netted more than three quarters of the total dollar amount from exits in 2014.

Between January and June, there were 54 exits among Israeli tech firms, worth $5.29 billion. That sum was more than 75 percent of the total for 2014, when 107 deals netted $6.98 billion, and was 86% of the $6.62 billion in 2013’s 91 exits.

It was Israel’s best-ever exit tally for the first six months of any year, figures showed. In fact, 2015 is shaping up to be the strongest year for merger and acquisition activity in Israel since 2012, when exit deals worth nearly $10 billion were recorded.

The figures came from a semi-annual M&A report issued by the IVC Research Center, a tech industry organization that keeps an eye on investment trends in the industry, and legal firm Meitar Liquornik Geva Leshem Tal, Israel’s largest law firm and a top dealmaker in the technology sector.

According to the IVC-Meitar Exits Report H1/2015, the average deal size for the first half of the year was $98 million, 51 percent more than the annualized average of $65 million in 2014 and 34 percent above the $73 million in 2013. On average, venture capital-backed exits during the period totaled $84 million, a 15 percent increase from the 2014 average, while non VC-backed exits jumped 80 percent from an average of $60 million last year to $108 million in the first half of 2015.

Those figures were somewhat skewed, the report said, by one mega-deal in March of this year. Almost 24 percent of the total exit value during the period was due to the $1.25 billion acquisition of FundTech, an enterprise applications company, by multinational fintech company DH. Located in Tel Aviv, FundTech was sold in 2011 by Clal Industries to US-based fund GTCR. Technically no longer Israeli-owned, FundTech still belongs on the list, an IVC spokesperson said, since “its management and activities are in Israel. Our reports relate to Israeli and Israel-related exits.”

With that, M&A activity has been“skewed” every year for at least the past five years. In 2014, for example, Israeli road safety tech MobilEye went public, with the company valuated at about a billion dollars. In 2013, Google bought out Waze for about a billion dollars, while IBM paid almost the same amount for cyber-security firm Trusteer. And in 2012, Cisco bought out Jerusalem-based TV security tech firm NDS for about $5 billion – the biggest ever M&A deal for an Israel-based tech firm.

According to Koby Simana, CEO of IVC Research Center, “in the first half of 2015 we saw company valuations at exits rising significantly and quickly, with 11 deals above $100 million each, compared with 17 such deals for the full year 2014. Such high-value deals are clear evidence of the availability of more acquisition capital, as well as of the fact that more companies and investors have been working on growing companies longer, thus providing the market with more mature potential acquisitions, which receive better, higher valuations.”

“On top of that,” Simana added, “we’ve been tracking more and more international technology companies and conglomerates from markets outside the US – particularly Asian and European corporations – who join the expanding pool of potential buyers of Israeli high-tech companies. Such new players are bringing with them an influx of new capital and growing international interest, driving up company valuations even further.”

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