Israeli high-tech exit activity soared to $23 billion in 112 deals in 2017, a new report by IVC Research Center and law firm Meitar Liquornik Geva Leshem Tal shows.
The “exceptional” total exit capital volume was due to two mega deals of more than $1 billion each, representing 72 percent of the total amount. Mobileye was acquired by Intel for $15.3 billion and NeuroDerm was acquired by Mitsubishi Tanabe Pharma for $1.1 billion. Excluding these two exits, the total exit volume reached $6.6 million, an increase of 19 percent, compared to 2016. Total transaction value of Israeli exits has grown steadily from $6.77 billion in 2013 to $23 billion in 2017.
The number of exit transactions of all types, however — initial public offerings, mergers and acquisitions, and private-equity buyouts — totaled 112 deals, down 7% from 2016 and a representing a fourth year of declines.
The number of M&A deals also decreased in 2017, by 13%, to 92 deals, while a total of 13 IPOs were carried out in 2017, raising a total of just $440 million. Most of the IPOs were transactions of low valuations, in alternative capital markets, the report said.
Three IPOs were performed in the US, but only one made it to Nasdaq — the IPO of cybersecurity firm ForeScout, raising $116 million. Six IPOs were held on the Australian Securities Exchange (ASX)), with an average capital value of $5.2 million per deal, indicating the ASX was seen as a new source of funding.
In 2017, United States and Canadian corporations were the most active buyers of Israeli high-tech companies, snapping up 39 firms, or 42% of the M&A deals. Israeli buyers were the second most active acquirers, accounting for 28% of the deals; European corporations (including UK & Russia) were purchasers in 13% of all M&A deals. Three M&As were led by Chinese acquirers — one deal less than in 2016.
Acquisitions by Israeli companies of Israeli targets totaled $393 million, the report said. The $200 million acquisition of Juno Lab by Gett was the largest deal among Israeli acquirers in 2017.
The data revealed a decrease of 18 percent in the number of exits in small to mid-range deals (up to $100 million) in 2017. On the other hand, the number of large size exits (above $100 million) showed an increase of more than 60 percent, following a slowdown in this range during 2016.
“Alongside a 60% increase in the number of exits of large amounts, we also see an increase in large capital raisings,” said Alon Sahar, a partner at Meitar, in a statement. “This figure supports the thesis that both entrepreneurs and investors are trying to establish bigger companies, while simultaneously aiming for higher value in the upcoming years.”
While software and life sciences exit activity slightly increased in terms of amounts, and kept to the average number of deals compared to 2016, the number of exits in communications (-29%) and internet (-28%) dropped significantly compared to the previous four years. Both sectors suffered from a decrease in exit capital volume. The deal value of cybersecurity exits in 2017 jumped to $1.48 billion in 13 deals from $563 million in 2016 in 14 deals, indicating an increase in the average deal size for the sector as well.
“The industry has experienced in recent years a decline in the number of transactions, but an increase in average deal size, accompanied by heightened interest in late stage growth investments,” said Dan Shamgar, a partner at Meitar. “In the coming years, many mature companies will reach the stage of making critical decisions about their future. Given the fact that Nasdaq IPOs continue to be challenging, companies should explore multiple alternatives, such as IPO in Tel Aviv and private mergers.”