In 2017, Israeli high-tech exit activity soared to $23 billion in 112 deals, IVC-Research - Meitar Liquornik Geva Leshem Tal. The exceptional amount included two huge deals accounting for 72% of the total. Mobileye was acquired by Intel for $15.3 billion and Neuroderm was acquired by Mitsubishi Tanabe Pharma for $1.1 billion. Excluding these two enormous exits, the total was $6.6 million, up 19% from 2016. The number of exits was down 8% in 2017 compared with 2016.
Excluding buyouts and exits above $1 billion, a major decrease was seen during 2017 in the number of non-VC-backed exits; 57 deals - the lowest in the past 5 years. The value of non-VC-backed exits continued to decline for the fourth year, down to $2.22 billion in 2017. VC-backed exits performed more steadily with 44 exits in 2017 worth $2.88 billion.
There was an 18% decline in the number of exits in small to mid-range deals (up to $100 million) in 2017. The major decline happened in non-VC-backed exits, while VC-backed exits demonstrated a minor decline. The number of large exits (above $100 million) was up more than 60% compared with 2016.
IVC Research Center CEO Benzi Segev said, “While we can see a decrease in several threads of Israeli high-tech, the specifics of this exit report support the known innovative strength of the Israeli high-tech. Although we noted a drop in the number of exits in the cyber security cluster - a major innovation center in Israel these days - the high valuations of the 13 M&A deals performed in 2017 prove that the Israel cyber sector created a knowledge hub that can supply innovation solutions even to most conservative industries”.
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 with the previous four years. Both sectors suffered from a decrease in exit capital volume.
Meitar Liquornik Geva Leshem partner Adv. Alon Sahar said, “One of the interesting items in the report relates to the large transaction volume increase. Alongside a 60% increase in the number of exits of large amounts, we also see an increase in large capital raisings. 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.” Meitar Liquornik Geva Leshem partner Adv. Dan Shamgar added, “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. 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.”
2017 Mergers & Acquisitions
IVC analysis of the number of mergers and acquisitions below $1 billion revealed a drop of 19% from 2016. Ninety Israeli high-tech companies were acquired or merged for a total of $4.67 billion in 2017, compared to $5.08 billion in 111 deals in 2016. Specifically, the number of communications and Internet M&As shrank in 2017, compared to the three previous years.
In 2017, 49 Israeli high-tech companies performed 68 M&As globally, similar to the past four years. However, the capital volume reached only $1.17 billion, compared to $3.46 billion in the M&As of 2016. This decline was caused by the absence of large deals in the software and Internet sectors, responsible for the majority of the M&A amounts in 2014-2016. The $200 million acquisition of Juno Lab by Gett was the largest deal among Israeli acquirers in 2017.
2017 Initial Public Offerings
Even though all the 13 IPOs were completed in 2017 by Israeli high-tech companies, the total reached a very modest $440 million in 2017. Three IPOs were held in the US, but only one made it to NASDAQ - ForeScout, raising $116 million. Six IPOs were held on ASX (Australian Stock Exchange), but with an average capital value of $5.2 million per deal. Therefore, it seems that ASX was more of a new source for funding, than a liquidity market.
Published by Globes [online], Israel business news - www.globes-online.com - on January 3, 2018
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