The number of exits by Israeli tech companies reached a low in the first half of this year, but the average exit value was the highest in the past six years, according to the exits report by IVC and law firm Meitar, released today.
According to the report, the first half of this year saw a dramatic decline in the number of merger, acquisition, and buyout deals and IPOs in comparison with the first half of 2019. In the first half of 2020 there were 52 exits with an aggregate value of $5.8 billion, which compares with 77 exits with an aggregate value of $7.5 billion in the first half of 2019. The report looks at exits valued at up to $5 billion each. The decline amounts to 32% in the number of deals and 22% in their aggregate value, the steepest recorded in the past six years both in deal numbers and in aggregate value.
The average value of exits in the first half of this year was $112 million, the highest since 2015. The report states that the high average value stemmed from three deals worth over $1 billion each that took place in the first half of this year: the acquisition of cybersecurity company Checkmarx by Hellman & Friedman for $1.15 billion; the acquisition of IoT security company Armis by CapitalG, the investment arm of Google parent company Alphabet, and Insight Partners, for $1.1 billion; and the acquisition of transport app Moovit by Intel for $1 billion.
Despite the high average value, most of the deals in the period were fairly small in comparison with the deals in the corresponding period in previous years. The report does not contain full information on the value of every deal, and its compilers estimate the values of deals according to various measures. Of the deals with known values, a little over a third were for over $100 million, which compares with two thirds in the corresponding period last year. In addition, in the first half of this year there was a relatively high number of deals worth $50-100 million - eight, compared with four in the corresponding period in each of the past four years.
As far as types of deals are concerned, the first half of this year was a thin period for buyout deals and IPOs, with two IPOs and one buyout (of Armis), which compares with eight deals of this type in the first half of last year.
"The investment market sends an optimistic message"
In the announcement accompanying the release of the report, IVC data analyst Michal Saam said, "The last time we saw numbers of this order was in the first half of 2016. On an optimistic note, the second half began with two IPOs, of PolyPid and Lemonade, with the latter making a substantial impression. We can hope that Lemonade's IPO will mark a new wave of Israeli IPOs on Wall Street, and it could be that we shall see signs of this in the current half year."
"In the first half figures we can see the considerable effect of the coronavirus pandemic," said Meitar partner Adv. Shira Azran. "These figures are consistent with the general atmosphere among potential acquirers, who because of the crisis are focusing on maintaining revenue and conserving cash, and avoiding using capital for acquisitions. We expect that we shall continue to see the declining trend in exits in the second half of 2020. On the other hand, in certain sectors, we are seeing a flowering that represents a basis for accelerated growth, such as in digital medicine, fintech, and in digital services generally. These, we hope, will represent the basis for the exits of the coming years."
Azran does nevertheless see positive signs in investment activity in the first half year. "In contrast to the low level of exit activity, the investment market is sending a hopeful message. Substantial investment activity, together with availability of cash in funds in Israel and abroad for investment in companies, provides a robust basis for company growth, and we expect this trend to continue in the second half of 2020."
Published by Globes, Israel business news - en.globes.co.il - on July 15, 2020
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