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Israeli tech exits jump 520% to whopping $82.4b in 2021, hit new records

171 M&As and IPOs recorded so far this year, with significant local acquisition activity, says new PwC report

Ricky Ben-David is The Times of Israel’s Startups and Business editor and reporter.

SentinelOne rings the closing bell at the New York Stock Exchange, June 30, 2021, in celebration of its initial public offering. To honor the occasion, Tomer Weingarten, SentinelOne co-founder and CEO, center with arm raised, is joined by John Tuttle, NYSE Vice Chairman and Chief Commercial Officer, second from right (NYSE)
SentinelOne rings the closing bell at the New York Stock Exchange, June 30, 2021, in celebration of its initial public offering. To honor the occasion, Tomer Weingarten, SentinelOne co-founder and CEO, center with arm raised, is joined by John Tuttle, NYSE Vice Chairman and Chief Commercial Officer, second from right (NYSE)

Israel’s tech firms saw exits jump an astonishing 520 percent in 2021 to an unprecedented $81.2 billion in value, shattering all previous funding records and up from $15.4 billion in 2020, according to an annual tech exits report published Wednesday by consultants PwC Israel. Exits are defined as merger and acquisition deals or initial public offerings (IPO) of shares.

The number of tech exits has grown in 2021 so far to 171 deals, compared to 60 last year, including 99 acquisitions totaling $11.5 billion in value, and 72 IPOs (including SPAC — special purpose acquisition companies — mergers), 45 of which were done on the Tel Aviv Stock Exchange.

(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.)

The PwC report recorded transactions between January and mid-December 2021. A separate report released earlier this week by Start-Up Nation Central detailed a record year for funding for Israeli tech firms, with an unprecedented $25 billion in investments from January through November, and 33 companies entering the unicorn club of private firms valued at over $1 billion.

The numbers “are tremendous,” said Yaron Weizenbluth, partner and head of the high-tech cluster at PwC Israel. “Last year was the end of the previous decade and it was the best year on record [for the tech sector]. It was the year of COVID-19, and we started seeing this upward trend in the later quarters of 2020 [that pointed to a strong 2021]. We were optimistic, but to be honest, we couldn’t have expected 2021 to be so unbelievable.”

There were strong signs of the rapid adaptability and resilience of the local technology sector by mid-2020, a year in which the world was facing unprecedented economic and social struggles, Weizenbluth told The Times of Israel, but the “degree of success” was not predictable.

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

The 72 IPOs and SPACs amounted to a value of approximately $71 billion, according to the PwC report, up significantly from 19 offerings in 2020 at a total value of 9.3$ billion. The average value per IPO also grew to $985 million, compared to $489 million last year, mainly due to listings in the US.

The highest-rated offering was for Israeli advertising technology firm ironSource, which started trading on the New York Stock Exchange (NYSE) in June after merging with US SPAC Thoma Bravo Advantage in a deal that valued ironSource at $11 billion.

Another high-value IPO was for cybersecurity company SentinelOne, which also completed its offering on the NYSE in June at a value of $9 billion. That same month, Monday.com completed an IPO on the Nasdaq at a value of $6.8 billion.

The PwC report noted that should it have included follow-on deals, where a company offers shares after an IPO, the value of Israeli tech exists would have amounted to a head-spinning $99.2 billion, with gaming tech company Playtika alone raising $13 billion in a follow-on deal in 2021. Playtika is owned by a Chinese investor group, which bought the company in 2016 for over $4 billion. It maintains its headquarters in Israel.

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.

Local acquisition activity also ramped up in 2021, with 32 deals where an Israeli company bought a local startup, an increase from 11 such transactions in 2020 and 10 in 2019. The most notable among these local acquisitions were those of Avanan by cybersecurity giant Check Point and Vdoo by DevOps company JFrog.

Weizenbluth said there may not have been a single huge acquisition deal in 2021, like the 2017 Intel acquisition of Mobileye for $15.3 billion, “but we are seeing healthy, strong deals across the board and this shows that the market is headed in the right direction.”

The “deeper story” behind the numbers, Weizenbluth posited, was that of the new “Israeli business culture” and the “new Israeli entrepreneur” who wants to build a strong company and take it public, rather than quickly develop and sell technology. This culture is “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,” he told The Times of Israel in November during an interview for a preview of the report.

“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.”

In 2022 and 2023, Weizenbluth said the tech industry is likely to see “more selective IPOs because the SPAC hype [that marked the beginning of 2021] is behind us.”

The SPAC boom “accelerated a process that gave companies the opportunity to enter the stock market through the back door,” and “we are going to see healthier IPOs activity in the US market,” he said.

“We seeing a lot of new unicorns in 2021, [33 and counting] and these are good, healthy companies whose next moves may include going public next year,” said Weizenbluth.

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