IVC-Meitar: Israeli exits up sharply in H1 2015

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High-tech exits climbed to $5.29 billion in the first half of 2015, 76% of the total 2014 amount.

In the first six months of 2015, Israeli high-tech exit activity climbed to $5.29 billion in 54 deals - nearly 76% of proceeds from exits in all of 2014, when 107 deals totalled $6.98 billion, and 80% of 91 exits worth $6.62 billion in 2013. The figures are part of the IVC-Meitar report for the first half of 2015 published by the IVC Research Center and the Meitar Liquornik Geva Leshem Tal law firm.

The average deal size in the first half of 2015 was $98 million, 51% more than the annualized average of $65 million in 2014 and 34% above $73 million in 2013. The average VC-backed exit in H1/2015 totaled $84 million, a 15 percent increase from the 2014 average, while non VC-backed exits jumped 80 percent from an average of $60 million last year to $108 million in the first half of 2015.

Meitar Liquornik Geva Leshem Tal partner Dan Shamgar said, "The first half of 2015 featured robust M&A activity across the industry, and the second half is already looking promising, with a pipeline of meaningful transactions in the works. We are experiencing growth both in the number and variety of potential buyers showing interest in Israeli companies, and in the variety of target companies - that are more mature and ambitious. In addition, investors in Israeli companies continue to be selective in defining the exit path and are willing to be patient in order to maximize value. We are optimistic about the second half of 2015."

Almost 24% of the total exit value in the first half of 2015 was due to the $1.25 billion acquisition of FundTech, an enterprise applications company, by multinational fintech company D+H. Five out of the ten largest acquisitions (all greater than $100 million) were software-related.

The report revealed that M&A deals accounted for a significant part of the increase in exits in the first half of 2015. Proceeds from mergers and acquisitions of Israeli and Israel-related high-tech companies in the first half of 2015 totaled $4.98 billion in 48 deals, exceeding the 2014 aggregate of $4.93 billion, partly due to the FundTech acquisition. In terms of the number of deals, the first half of 2015 totaled 55% of the annual average M&A deal-making in the previous five years.

The average M&A deal was the highest in six years, at $104 million, second only to 2012, when Cisco Systems acquired NDS for $5 billion. Deals in the $100-500 million range accounted for 54% of M&A proceeds in the first half of 2015, explaining the high average, unlike 2012 figures, when the exceptional NDS deal accounted for the increase in total proceeds.

IVC Research Center CEO Koby Simana said, “In the first half of 2015 we saw company valuations at exits rising significantly and quickly, with 11 deals above $100 million each, compared with 17 such deals for the full year 2014. Such high-value deals are clear evidence of the availability of more acquisition capital, as well as of the fact that more companies and investors have been working on growing companies longer, thus providing the market with more mature potential acquisitions, which receive better, higher valuations. On top of that,” he added, “we've been tracking more and more international technology companies and conglomerates from markets outside the US - particularly Asian and European corporations who join the expanding pool of potential buyers of Israeli high-tech companies. Such new players are bringing with them an influx of new capital and growing international interest, driving up company valuations even further,” concluded Simana.

Israeli high-tech IPO activity has continued, with six companies going public. The direct proceeds from the IPOs were somewhat modest, at $308 million, only 6% of total exit proceeds in the first half of 2015, compared with $2.1 billion (29%) raised in 16 IPOs in 2014 as a whole. Only two of the six companies that went public were venture-backed, compared with 2014, when more than half of the IPOs were by VC-backed companies.

While IPO activity to date peaked in 2014, more than 20 Israeli companies are currently planning to go public in 2015 - 2016, and three to four IPOs are scheduled to take place by the end of the year, for a total of up to $500 million.

The IVC-Meitar Exit Report also reveals that acquisition activity by Israeli high-tech companies continued in the first half of 2015, with 24 Israeli high-tech companies closing a total of 32 acquisition deals of both local and foreign companies in order to fuel expansion efforts.

Published by Globes [online], Israel business news - www.globes-online.com - on July 7, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

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