Israeli High-tech exits Reached $6.94 Billion

6 January, 2015

Seventeen Israeli High-tech IPOs raised approximately $2.1 billion during 2014

Seventeen Israeli High-tech IPOs raised approximately $2.1 billion during 2014

During the last year, 99 Israeli high-tech exits totaled $6.94 billion, up 5 percent from $6.59 billion of 2013 (90 exits). While 2014 final figures were close to those of the previous year, a detailed analysis performed by IVC Research Center and law firm Meitar Liquornik Geva Leshem Tal, reveals significant changes.

Total Exits 2005-2014
Total Exits 2005-2014

The year 2014 was characterized by notable growth in both the number and size of IPO exits. Seventeen IPOs accounted for $2.1 billion, compared to eight IPOs that brought proceeds of some $0.36 billion in 2013. MobilEye – the largest IPO of 2014 – raised slightly over $1 billion and was listed on the New York Stock Exchange. NASDAQ-bound firms underwent 11 Israeli high-tech IPOs in 2014, in amounts ranging from $35 million to $150 million.

Alon Sahar, Partner in law firm Meitar, noted that even though total capital raised through exits in 2014 wasn’t remarkably different from that of 2013, the blend of deals is instructive. “The interesting finding of 2014  is the increasing number of IPOs. Sometimes IPOs reflect a ‘market trend’, bu it also reflects real ability of the industry to build larger companies for long term.”

He said there is a correlation between the volume of IPOs and the number of growth round deals, which is also on the rise. “In light of success stories such as Mobileye and CyberArk, two companies that brought on investors at later stages and then followed the IPO road, more companies can be expected to turn in the same direction. This trend may also explain current findings on M&A proceeds: the number of deals below $5 million dropped to the lowest in a decade, with only 25 deals.”

In 2014, deals involving Israeli and Israel-related companies that were acquired or merged were valued at $4.84 billion, a 22 percent decrease from $6.23 billion in 2013. Analysis of M&As by deal size reveals a 45 percent increase in the number of $100-$500 million deals in 2014. Sixteen M&As accounted for $2.91 billion, compared to 11 deals in 2013 with $2.57 billion. Five deals ranging between $50 million and $100 million brought in $425 million, a 73 percent increase from four deals in 2013 that totaled $246 million. The number of M&As ranging $10-$50 million also increased.

There was also a decrease of 36 percent in exit proceeds below $5 million, continuing the trend from 2013. Koby Simana, CEO of IVC Research Center said, “Although 2014 M&A figures show a decrease in total proceeds from the previous year, 2014 was actually far more successful in terms of return on equity for investors. It’s important to remember that in contrast to an IPO, where investors may continue as shareholders and sometimes increase their shares, as happened following the Mobileye IPO, in M&A deals investors no longer have a stake following the exit,” explained Simana. “Proceeds from M&A are divided among entrepreneurs, investors and sometimes company employees, and investors expect a positive return on equity. In the venture capital industry, it is customary to strive for a minimum return of three times equity. In these terms, 2014 was an excellent year, especially in the life science, cleantech and communications sectors, with the highest annual return on equity.”

Maybe the most important finding is that mong 82 acquisitions of Israeli high-tech companies in 2014, 24 were performed by other Israeli companies, compared to 19 such deals in 2013. The report also analyzed the number of M&A deals where Israeli companies were acquirers. In 2014, 42 Israeli high-tech companies chose to grow through the acquisition of at least one company, Israeli or foreign, and were responsible for 57 deals, in total.

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