Overall M&A deal value in Israel in 2023 amounted to $9.8 billion, down 46% from $18 billion in 2022, according to the PwC Israel 2021 M&A Report, which was released today. This was the lowest figure since 2014. The fall in overall deal value and the number of deals was substantial even before the Israel-Hamas war began on October 7.
The number of deals in 2023 fell 23% from 2022 to 110 - the lowest figure since 2015. The average value of a deal amounted to $131 million in 2023, down from $202 million in 2022 but higher than the average deal in 2021, which was $126 million.
PwC stresses that the sharp fall in all parameters of deals was influenced by the global trend that began in the second half of 2022. But the report adds, "In the first three quarters of 2023 we clearly identify that the damage to the Israeli market is relatively higher than the global trend and this can be attributed the political and social uncertainty in Israel." Looking at the entire year, PwC assumes that the war will also negatively influence deals and the timing of their completion.
PwC found that in 2023 there was only one deal worth more than $1 billion, which was Thales $3.6 billion acquisition of cybersecurity company Imperva. This was a company founded in Israel with hundreds of employees in the country but which was sold by a foreign private equity fund so that even the seller was not Israeli. However, PwC found that the share of deals of up to $100 million rose sharply to 75% of all deals, compared with 62% in 2022.
Fall in foreign investments
Another prominent finding was that in 2023 foreign investment in Israel fell 41% to $6.7 billion. PwC believes that this can be attributed to a large extent to foreign investors' concerns about the political and social developments taking place in Israel in 2023, as well as the war.
Prior to the outbreak of the war, in the first three quarters of 2023, foreign investment fell 64% and 67% from 2022 and 2021 respectively. "Since the decrease reflects significantly higher percentages than the trends we have seen in the world (which were affected by the rise in interest rates and concerns about global recession), it seems that the decrease can be attributed to a considerable extent to the political and social instability created by the judicial reform in Israel during 2023," the report states.
Also in 2023, Israeli investment overseas and Israeli investments in Israel fell 45% and 62% respectively.
A trend that remained unchanged from previous years was the leadership of the tech sector, which was responsible for deals worth $8 billion, or 81% of the overall deal value. This reflects on the Israeli economy's reliance on the tech sector.
In terms of the buyers, 2023 saw a virtual halt in deals by financial buyers, such as investment funds. PwC believes this is due to the difficulty of competing with strategic buyers (buyers from the same branch of activity of the acquired company), which have an advantage, due to the rise in interest rates and the difficulty of generating synergies, as well as from continuing to "sit on the fence" in anticipation of a fall in the value of companies.
Published by Globes, Israel business news - en.globes.co.il - on December 13, 2023.
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