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Israel’s M&A deals surge to 166, clocking value of $20.4 billion in 2019

The previous year saw fewer deals but a higher valuation; this year, the number of M&A deals worth $400 million-$1 billion more than doubled

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

Illustrative image of a handshake (iStock by Getty Images)
Illustrative image of a handshake (iStock by Getty Images)

Merger and acquisition activity in Israel surged 34% to 166 deals in 2019, compared to 124 deals in 2018, and reached a deal value of $20.4 billion, according to a new report by PwC Israel.

The deal value this year is, however, lower than the deal value of 2018, which came in at $21.6 billion, PwC’s M&A report for 2019 shows.

The report analyzes the merger and acquisitions of Israeli companies, and is not limited to the tech industry alone. Such deals as the sale of Mellanox Technologies Ltd. to Nvidia, valued at $6.9 billion; Habana Labs to Intel, valued at $2 billion; and Lumenis to funds of Baring Private Equity Asia (BEPA), valued at $1.2 billion, which were announced this year but not completed, are not included in the PwC numbers.

According to the data, the number of deals in the range of $400 million to $1 billion more than doubled, to nine, accounting for as much as 42% of all activity, up from four deals and 38% in 2018. On the other hand, deals worth over $1 billion declined to four, from five in 2018.

The tech sector led the way in deal-making, marking $9.1 billion in deal value, followed by the production industry with $4 billion, the data showed. The pharma sector continued to weaken in the wake of low activity levels by the troubled Teva Pharmaceutical Industries Ltd., which used to be a key player in that segment and in the M&A market at large, the report said.

The Orbotech acquisition by KLA-Tencor for $3.4 billion and Delek Group’s buy of Chevron North Sea for $2 billion were among the prominent deals this year.

The value of deals by US entities was $11.5 billion in 2019. This figure was lower than the $12.9 billion in 2018, but the 2019 figure is still “strong,” especially in light of a US tax reform that made offshore investments less attractive. “Taking that into account, this is a strong show of faith by US investors in Israeli companies,” PwC said in a statement.

Value of Asian deals tanks

East Asian players continued to be active in the local deal market, with 10 deals this year, up from eight last year. However, the average deal price tanked to $75 million, compared to $452 million and $112 million in 2017 and 2018, respectively. This highlights the fact that investors from this region, Chinese in particular, are struggling to make large deals in the local market, due to political and regulatory considerations, the report said.

“2019 was a vibrant year for M&As,” said Liat Enzel-Aviel, partner and leader of Transaction Services at PwC Israel. “The constant streak of over-$100 million deals illustrates top managements’ desire to get into the action at later stages of their business for higher returns, and the high price environment supported by the global economy.”

Enzel-Aviel said that 2020 is expected to open with the completion of the Mellanox, Habana labs and Lumenis deals, and the Israeli M&A market is not “showing any signs of slowing down.”

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