EXITING IN STYLE: 2012 HOT YEAR FOR STRATEGIC ISRAELI HI-TECH ACQUISITIONS
A report compiled by PwC Israel indicates that in 2014, fifty high-tech companies completed exits for a total of US $5.5 billion. The report summarizes exits completed through strategic acquisitions by other companies. It does not, however, include either the acquisition of NDS, (a company which was originally an Israeli startup but since acquired by NewsCorp) by Cisco, or the merger between 3-D printer manufacturers Objet Ltd. and Stratasys, Inc., which given the structure of the transaction, is not considered by PwC to qualify as an “exit”. Adding these two transactions would bring the total to US $11.2, breaking the previous record of $10 billion generated from tech exits in 2006.
Either way, the PwC report demonstrates that interest in Israeli technology is alive and well and living on the cutting edge of more than seven different industries. The average deal size this year came to $111 million, the highest in the eight years covered by the report. Overall the multi-year trend appears to be for fewer but larger transactions, a sign of Israeli high tech’s coming of age, according to PwC’s Rubi Suliman. Companies today tend to be more mature at the time of exit.
The largest deal was the acquisition of supply chain management software company, Retalix by NCR. This acquisition is still pending completion, but was approved by Retalix shareholders in early January. Other large deals include the acquisition of enterprise flash storage company, XtremIO by EMC and the acquisition of mobile advertising technology Amobee by SingTel. Almost one third of all acquisitions carried a price tag of US $100 million or more.
An industry breakdown reveals that unlike last year when Internet was king, the industry attracting the most attention last year was IT and enterprise software, with exits totaling close to US $1.5 billion. Life science exits came to nearly $1.3 billion.
The forecast for further acquisitions looks promising. Israel’s history of high profile acquisitions has created a buzz in global tech circles which may prove to be self-reinforcing. Many global high tech giants have established R&D centres in Israel and routinely check out local startups. Some, such as Microsoft and Google, have opened accelerators to enable basement level entry to Israeli high tech.
Private equity firms are also exhibiting increasing interest. IPOs are another option. Should market conditions improve, several seasoned Israeli start-ups are likely to go through with public offerings in Israel and/or abroad. This year’s exit season has already begun with Cisco’s announcement of its intention to acquire four-year old Intucell for close to half a billion dollars. Ending so far in a reported rejected offer, Apple has shown interest in Israeli startup WAZE, and last autumn, IBM’s alleged plans to acquire mobile management software firm, Red Bend, were reported in the press.