Israeli high-tech exits in the first half of 2017 have fallen far short of their total this time last year, according to a report. The IVC-Meitar Exits Report today discovered that the $1.95 billion across 57 deals in H1 2017 represents just 20% of the amount accrued in H1 2016. The average exit deal this half is $34m–far below the $87m reported last time.
The biggest deals in the first half of 2017 were the $340m sale of Tel Aviv-based medtech firm Valtech by US company Edwards Lifescience, and Juno LAB’s $200m acquisition by Gett. Israel’s top three deals in H1 2017 accounted for $700m, or around 36% of the period’s entire deal money.
Exits in 2017 comprise 46 M&A deals, seven IPOs and four buyouts. They represent a five-year low for Israel, which in recent years has marketed itself as the ‘Startup Nation’, creating a long line of globally-successful high-tech brands.
“The current report, covering the first half of 2017, alongside the second half of 2016, indicate a clear trend – a decrease in the number of merger and acquisition deals, which requires an explanation,” writes Alon Sahar, Partner at law firm Meitar Liquornik Geva Leshem Tal, citing changes in US and Chinese regulation.
“We believe that the possible change in taxation regime in United States forces American acquirers to rethink their capital management strategies, which greatly affects modeling the deals in process,” he adds. “The regulatory boundaries in China suspended significant activity by Chinese acquirers, or discouraged Israeli companies from negotiating with potential Chinese acquirers.”
“We should take into account the noticeable growth in the volume of investments and the availability of capital for growth stages,” adds Sahar’s colleague Dan Shamgar. “The number of deals in which companies raise tens of millions in dollars in proceeds has never been higher.
“The increasing variety of investors supporting late stage companies and the capital volume which has been available to companies for growth purposes – are the largest ever,” he adds. Shamgar points to the common complaint that Israeli private companies are being valued too highly.
Industry insiders have long warned that Israel’s rapidly-expanding tech bubble is soon to burst. The country, dubbed by some “Silicon Wadi”, still pours public money into the tech industry: its R&D spending, for example, represents 4.3% of GDP. Today’s news is unlikely to enthuse anyone in the local ecosystem, however.