Israeli high-tech exits plunge 67% in 2016 – PwC

IPOs and M&As drop to $3.5 billion as market takes ‘breather’ after 2014-2015 acquisition boom, audit firm says

Shoshanna Solomon is The Times of Israel's Startups and Business reporter

Money image via Shutterstock
Money image via Shutterstock

High-tech exits in Israel dropped by 67 percent in 2016, to $3.5 billion from $10.69 billion last year, a report by PWC shows. Exits are defined as initial public offerings and merger and acquisition deals.

There were 55 exits in 2016, lower than both 2015 and 2014, which saw 70 exits each. The average value per exit in 2016 was $64 million, down from $153 million in 2015.

Rubi Suliman, high-tech leader at PwC Israel, said the decline did not necessarily indicate a crisis but meant that the market was taking “a breather” after the latest boom in acquisitions, which reached highs in 2014 and 2015.

“Buyers need some time offline to reap as much benefit from the technologies and companies they already have, and then to check potential new technologies for investment,” Suliman said in a note accompanying the data. “Acquisitions and post-merger integration are complex tasks for every enterprise, no matter how large, and require considerable resources to ensure that the M&A is successful. A notable support for this hypothesis is the fact that this year’s large buyers are significantly different than those we’ve seen last year. In monetary terms, 87% of acquisitions in 2015 were not by those buying in 2016.”

PWC's Rubi Suliman , hi-tech leader (Courtesy)
PWC’s Rubi Suliman, high-tech leader (Courtesy)

The report excluded the sale of Playtica to China’s Giant Interactive Group in 2016 for $4.4 billion, since it was the second time this company was sold and there was no significant exit by Israeli shareholders this time around, PwC said. The sale of Otto to Uber, for $680 million, was also excluded from the data, as the company is owned by an Israeli expatriate but is incorporated in the US and is not active in Israel.

This year was also characterized by only two initial public offerings by Israeli tech companies, down from eight in 2015 and 18 in 2014, PwC said. The two companies that issued shares this year were trendIT, which raised $5.9 million on the London Stock Exchange, and Vonetize, which raised $4.2 million on the Tel Aviv Stock Exchange. The data includes only Israeli companies and those that have a significant Israeli affiliation, and refers to exits with a value greater than $5 million and whose amounts were made public.

The top two deals this year were Oracle’s acquisition of Ravello for $430 million and Francisco Partners which bought SintecMedia for $400 million, the report said.

The market is still seeing a lot of availability of money for investing in Israeli high-tech, with local and international VC and investors all present in the market, Suliman said.

“Those tech companies that will proactively build value for the long run are set to benefit from a renewed wave of acquisitions in the not-so-distant future,” he said. “New players are entering the local market all the time, and others are sure to follow in the future. Chief among those will be Chinese investors.”

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