Acquisitions of Israeli companies reach $9.5b value so far in 2021

The value of acquisitions of Israeli startups and companies so far in 2021 has reached $9.5 billion across 86 deals, nearly double the value of acquisitions in 2020 when the world was hit by the COVID-19 pandemic and up nearly 25 percent from 2019 with $7.7 billion in deals, according to an upcoming report by consultants PwC Israel.

The firm is in the process of analyzing the figures and completing the study, expected sometime in the next few weeks, but The Times of Israel got a glimpse of the initial findings on Wednesday.

“During the process of putting the report together, we noticed this huge pattern,” said Yaron Weizenbluth, partner and head of the high-tech cluster at PwC Israel. “Over the course of 2021, everyone was busy with the amount of IPOs [initial public offerings] and the SPACs [special purpose acquisition companies, which were a preferred alternative route to the public markets for many Israeli companies earlier this year], but we didn’t really notice that we have a tremendous amount of tech exits and this reflects the current trends in the Israeli ecosystem.”

Although there were no huge deals like the 2017 Intel acquisition of Mobileye for $15.3 billion or the 2019 acquisition of Mellanox Technologies by Nvidia, there were still 86 acquisition deals at a value of $9.5 billion, said Weizenbluth. “This figure doesn’t include the IPOs and the SPACs, just pure acquisitions, tech exits,” he added, noting that a majority of the deals were for small- and medium-sized companies and startups.

Some of the notable acquisition deals this year include that of Israeli online genealogy platform MyHeritage by Francisco Partners for $600 million, the estimated $100 million acquisition of Sedona Systems, a maker of communication technologies, by Cisco, and that of application monitoring company Epsagon for $500 million, also by Cisco.

Another interesting tidbit from the report is the significant increase in the number of Israeli buyers who made up 30 percent of the total amount. Weizenbluth said 26 of the 86 acquisition deals in 2021 so far were “blue and white” agreements where both sides — the buyer and seller — were Israeli. This is compared to just 11 such deals last year, according to the report.

MyHeritage headquarters in Or Yehuda. (MyHeritage/Wikipedia/CC BY-SA)

“What we are seeing is a cycle that many Israeli entrepreneurs are closing. If three or four years ago, the dream for founders was still to sell their company, now their dream is to buy a company,” he said. “Israeli buyers are closer to the ecosystem, they are immersed in it and they see the potential.”

These trends also tap into a new “Israeli business culture,” said Weizenbluth, “marked by chutzpah, quick thinking and acting, building a company, going public, and then coming back and buying an Israeli company to accelerate their own.”

The majority of buyers (47%) in 2021 were still American companies, in line with previous years, Weizenbluth noted. European companies accounted for 12% of the buyers, and Asia-based firms made up 6%. The remaining five percent were firms based in other regions or with multiple bases.

The rest of the PwC Israel report will focus on the “impressive year for the Israeli tech market” and how 2022 and 2023 will likely yield similar activity,” said Weizenbluth.

Yaron Weizenbluth, partner and head of the high-tech cluster at PwC Israel. (Courtesy)

“We’re entering a new stage for the Israeli ecosystem, with more unicorns [private companies valued at over $1 billion], a huge amount of investments, and we’re likely to see even more acquisitions in the coming years and strong IPOs; this year wasn’t a one-off,” he added.

Weizenbluth believes the SPAC boom that marked the beginning in 2021 is done with as investors push for the traditional IPO process. “It is the right way to go; not through the back door but the main door.”

The ironSource management team in March 2021. (Courtesy)

IPO processes are long and complicated, and companies have to open their books to prospective investors and regulators, and meet minimum revenue and asset requirements. With SPACs, companies can merge with firms that are already listed publicly, allowing them to quickly enter stock exchanges.

“There have been some great SPAC deals, like the one of ironSource, said Weizenbluth in reference to the Israeli advertising technology firm that started trading on the New York Stock Exchange in June after merging with US SPAC Thoma Bravo Advantage. The deal valued ironSource at a whopping $11 billion.

Weizenbluth said that the Israeli tech ecosystem is likely to see well over $10 billion in acquisition value by the end of the year.

2021 has also been a record year for investments in Israeli companies, with local outfits raising close to $18 billion since the start of 2021, almost double the total raised in all of 2020, itself a record year, according to the IVC-Meitar Israel Tech Review report, published by the IVC Research Center and the law firm Meitar last month.

That report also found that the value of high-tech exits in the first three quarters of 2021 (Q1-Q3) reached $18.92 billion, including IPOs and SPACs.