Decline in high-tech exits plus growth show Israel building strong economic backbone

“Israel is building a strong and significant infrastructure of companies,” said Shira Azran, partner at Meitar Liquornik Geva Leshem Tal & Co.

By David Jablinowitz, World Israel News

IVC-Meitar’s annual Exit Report released Tuesday shows a significant decrease in the number of Israel’s high-tech exits in Israeli hi-tech sector while the number of companies raising over $30 million rose to a peak of 62 transactions in 2018.

“This combination of a significant increase in the volume of investments in growth companies and a relative stagnation in exits value, highlights the fact that Israel is building a strong and significant infrastructure of companies that in the coming years will examine their ability to reach an exit that reflects a significant return to investors,” said Shira Azran, partner at Meitar Liquornik Geva Leshem Tal & Co.

Exits in Israel’s high-tech industry were valued at $6.22 billion in 58 deals in the first half of 2018, according to the exit report.

This total includes two deals worth at least $1 billion each: the acquisition of automated inspection equipment company Orbotech by KLA-Tencor for $3.4 billion; and the $1 billion acquisition of NDS by Permira. These two deals raised the average exit amount to $107 million in the first half of this year, from $31 million in the first half of 2017.

Exits are comprised of Initial Public Offerings (IPOs), mergers and acquisitions (M&As), and private-equity buyouts.

M&As dominate exit activity in Israel, both in numbers and dollar value. In the first half of 2018, there were 53 M&As (excluding the two mega-exits) totaling $1.71 billion.

There were few such exits in the $100-500 million range, which contributed to the slowdown. According to the IVC-Meitar report, this range usually captures the largest amounts of shares and is responsible for most of the returns. The number of deals in this range has halved in the last few years.

Regarding sector trends, the IT and enterprise software sector continued to provide the greatest number of exits in 2018 (35), though there was a notable one-third increase in the number of life-science exits (24) and a similarly significant decline in deals in the internet sector.

“Usually, the second half is weaker compared to the first half of the year, and by now the decline both in number and amounts of exits indicates that 2018 is going to finish with poor exit performance. However, despite the sluggish performance in H1/2018, the annual exit activity might rise in a stronger second half,” said Marianna Shapira, Research Director at IVC Research Center.

IVC is a leading data source and business information company in Israel’s high-tech industry