The annual report by PwC Israel shows that Israeli companies made 61 exits for a total of $4.9 billion in 2018, compared with 70 exits totaling $7.4 billion in 2017, a 33% drop in the volume of deals. The average deal in 2018 was $81 million, compared with $106 million in 2017.
These figures do not include the largest deals in Israeli high tech: Orbotech Ltd. (Nasdaq: ORBK) (sold for $3 billion, but the deal was not finalized), Imperva ($2.1 billion), Mazor Robotics (over $1.5 billion) and NDS ($1 billion), because these were not the first exits in these companies. The first three held IPOs and were public companies when they were acquired, while ownership of NDS changed again. Had the report included these deals, exits in 2018 would have reached $13.5 billion, compared with $23.8 billion in 2017. As in previous years, the report included only deals of $5 million or more.
The largest group of exits, 39%, was in the $10-50 million range. 26% of the deals were in the $100-500 million range, 18% were in the $50-100 million range, and 15% were in the $5-10 million range.
PwC high-tech partner Yaron Weizenbluth attributed the decline in the number and volume of exits this year to the maturity of the high-tech industry and the development of the secondary market in the sector: "The secondary market has improved beyond all recognition. A lot of shares are changing hands above the good high-tech companies. The entire sector in which money passes through hands without any need for stock exchange institutions has become far more sophisticated, and so we're seeing fewer sell-offs," he says. "The result is that there are fewer exits and at lower prices, while more and more companies are developing high values out of sight and waiting for a big exit. In the future, we'll see more exits at high values, but fewer exits in general."
Why are there no deal in the Internet sector?
From a long-term perspective, there is a clear trend towards instability in exit figures in recent years. There was a five-year downtrend in 2006-2010 in the number of deals, the size of the average deal, and the total annual value of exits, which fell from $10 billion in 2006 to $1.17 billion in 2010. This was followed by a four-year rising trend, in which the total annual value of exits rose from $1.17 billion in 2010 to $14.85 billion in 2014. Since then, however, exit reports have exhibited no clear trend, with figure going in opposite directions from one year to another. Figures went down slightly in 2015, plunged 66% in 2016, rose nearly 50% in 2017, and again fell slightly in 2018.
Nine public offerings were held in 2018, including seven by life sciences companies. All of the public offerings took place overseas: five on Wall Street and four on the Australian Securities Index. The offerings totaled $890 million, compared with nearly $1.5 billion in the preceding year. The average size per offering fell from $133 million in 2017 to $99 million to 2018.
There were 18 exit deals in the life sciences, the highest number in this sector for the past decade and 30% of the all exits for the year, the highest proportion in the past decade except for 2015, when the proportion was almost identical. The total amount of thes life sciences exits was $1.6 billion.
The most significant decline in the past year was in the Internet sector, in which the number of deals fell from 17 in 2017 to only three in 2018. The total amount of the deals plummeted from nearly $10 billion to a mere $105 million. "In our opinion, this decline resulted from the fact that fewer companies define themselves as active in this sector, because the need for specification has grown over the year," PwC adds. The leading sector this year was again computers and software for corporations. There were 21 deals totaling $2.35 billion in this area in 2018, almost half of all deals in 2018.
Published by Globes, Israel business news - en.globes.co.il - on December 30, 2018
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