"There's a lot of capital available in the local market. The money is there and it's cheap," said Barclays Capital Israel manager Len Rosen at the Mergermarket M&A in Israel Conference in Tel Aviv. He believes that foreign stock markets are open to Israeli companies, and that it is easy for them to obtain financing. However, whereas this once affected the growth of the Tel Aviv Stock Exchange (TASE), that has now changed.
"Until a few years ago, we didn’t think that dual listing added to companies. Now we think that it does. Listing for trading on the TASE is a logical way of attracting local and foreign investors," says Rosen.
Gilat Satellite Networks Ltd. (Nasdaq: GILT; TASE: GILT) co-founder Joshua Levinberg has a slightly different take on the issue. Gilat recently acquired two US companies for $160 million and also took a $40 million loan from First International Bank of Israel (TASE: FTIN). He says that Gilat reviewed various options for raising the capital, and found that Israeli banks were more flexible and competitive than US banks.
However, as far as raising money on the capital market is concerned, Levinberg believes that the US market is the better alternative. "When looking at the Israeli high-tech industry, we see that big companies like Amdocs Ltd. (NYSE: DOX) and Check Point Software Technologies Ltd. (Nasdaq: CHKP) don’t even think of listing for trading in Israel," he says. "Even mid-sized companies like Gilat look at New York when they want to raise equity. We don’t go to Rothschild Boulevard because it is far away, while New York is close."
Speaking at the "Cross-border M&A" panel, Levinberg said that, in his opinion, the greatest challenge facing Israeli start-ups was to become global companies, because the Israeli market was small. "A global presence is a challenge, and M&A is one way to achieve it."
However, the panelists noted that mergers between Israeli and foreign companies also include culture clash. "The human factor is the important thing for a successful integration, so learning the culture is the key to success," said Herzog Fox Neeman partner Alan Sacks.
KPMG Somekh Chaikin head of corporate finance Hillel Schuster agrees, citing examples. "Israel is infamous for a lack of discipline during the sale process." He says that if executives want to meet executives of a German company, you first send a letter, and after receiving a reply, call the assistant to the deputy of the executive. Conversely, in Israel, you call and set a date. He adds, however, that as Israeli companies mature, they change.
Schuster says that cleantech is a hot field for M&As, along with a relatively surprising sector - plastics, where he predicts that M&As will take place.
Published by Globes [online], Israel business news - www.globes-online.com - on March 2, 2011
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