Israeli high-tech startups were red hot in 2015, and are entering 2016 as exciting commodities for investors worldwide, according to numerous end-of-year market reports.
Forbes, the World Economic Forum and the Heritage Foundation all rank Israel among the 30 best economies in the world in which to do business.
“2015 was a strong year for exits and investments in Israeli startups,” according to the Ethosia Human Resources report.
The “Israel 2015 High-Tech Exit Report” published by PwC showed that the total deal value from acquisitions increased by 44 percent.
In 2015, Israeli high-tech mergers and acquisitions (M&As) rose to $7.2 billion from $5 billion in 2014, according to PwC.
“We have grown accustomed to the presence in Israel of global giants like Facebook, Apple, IBM, Qualcomm, Microsoft, Intel and more,” writes Rubi Suliman in the PwC report.
“This year we have seen some new players in the local M&A market such as ARM, Amazon and Zynga. Israeli companies such as Check Point, Mellanox, ironSource and Wix are also actively or potentially in on the action. In 2015, 56 buyers acquired 62 companies, versus 49 buyers that acquired 52 companies in 2014.”
“The amounts currently invested in Israeli high-tech are unprecedented, and it seems that this will bear fruit in the form of more innovative companies that will keep Israeli high-tech rolling forward.”
The most active multinational player in the Israeli high-tech area in 2015 was Microsoft. The global company acquired four Israeli startups last year: Secure Islands, Adallom, N-Trig and Equivio. At the end of 2014, Microsoft also bought Aorato.
Ethosia listed EZchip ($810 million), cCam ($650m) and Lumenis ($510m) as the top Israeli exits in 2015.
“The increase in M&A deals … is driven by continued appetite by large multinationals to use their massive cash holdings to acquire innovative future technologies as the best way to preserve value in the current environment of super-low returns,” says Suliman. “Israeli high-tech remains a focal point for international M&A deals.”
Asian delegations to Israel grabbed headlines throughout 2015 and reports show that it was definitely not a one-off.
The Ethosia and PwC report also cite further Asian investments for 2016.
“While ranked top in terms of the number of delegations to Israel and interest they show, the Chinese are still on the sidelines and have not made significant acquisitions of Israeli high-tech companies,” reads the PwC report. “However, the Chinese do make investments in Israeli high-tech, and have made quite a few acquisitions in other industries, so it’s possible to assume that it is a matter of time before they get into the game.”
Ringing in 2016
There was a drop in IPO activity in 2015 — Israeli companies recorded just $3.5 billion in 2015 from eight companies as compared to $9.8 billion for 18 IPOs in 2014, led by the Mobileye’s IPO that raked in close to $1 billion.
However, 2015 is still considered to have been “red hot,” as Ethosia CEO Eyal Solomon puts it. Solomon and Suliman expect 2016 to be sizzling as well.
“The Israeli market seems to have grown desensitized to the news of yet another exit. But, that’s quite unjustified, because this is actually quite amazing, on a global scale,” writes PwC’s Suliman.
“2016 will also be buzzing with M&A activity. The amounts currently invested in Israeli high-tech are unprecedented, and it seems that this will bear fruits in the form of more innovative companies that will keep Israeli high-tech rolling forward. The bottom line is that at this juncture, Israeli high-tech has all ingredients to continue producing larger than ever exits.”
“We foresee the growth in the high-tech sector continuing in 2016,” says Solomon of Ethosia. “We’re aware of talk about technology trends and forecasts saying the tech bubble will burst. But we believe there are ample reasons proving that the Israeli market is strong and the companies belonging to these ‘trends’ have profitable business models.”