Israel might be a small country, the size of New Jersey, but it is a hotbed for innovation and 2014 has seen a number of successful investments and exits, with Israeli companies being bought by some of the world’s largest companies and an impressive increase in the value of Israeli M&A transactions.
Although 2013 was reported as being a ground breaking year for Israeli companies, with M&A transactions reaching $8.3 billion, an increase of 16% from 2012, data so far for 2014 have already beaten that. A recent recap of Israeli M&A transactions conducted by Globes, one of Israel’s largest financial papers, revealed that Israeli companies, specifically in the hi-tech and biomed sectors, have remained attractive to foreign investors over the past ten years regardless of any foreign influences such as politics, security issues and domestic economy. More specifically, 2014 has already proved to be the most lucrative year for Israeli M&A, with transactions summing up to approximately $10.7 billion. The previous two years saw a significant drop in the number of Israeli companies making acquisitions internationally, but 2014 has seen an upturn in these transactions and it looks like this trend will continue.
The 2014 M&A “map” of transactions involving Israeli companies reveals a clear image, according to which the technology sector was the most attractive with 42% of all related M&A’s and the biomed sector accounting for approximately 8.5%, even though the largest deal for 2014 was in the consumer sector. Additionally, Israeli companies are becoming more attractive targets for the Far East, especially China. In the past year at least five M&A transactions were conducted between Israeli and Far Eastern companies, including the largest M&A deal of the year so far, which was the acquisition of Tnuva (one of Israel’s leading food suppliers) by China’s Bright Food Group Co. This transaction is believed to have helped set the positive tone for the future, allowing Israeli companies to bloom both in Western markets, as it has done thus far, but also in the new, uncharted territories of the Far East.
This steady increase in cross-border M&A transactions has resulted in an increase of international law firms in the Israeli market and has also changed the playing field among local Israeli firms. While in the past only the top ten Israeli law firms were involved with cross border M&A, we are now seeing smaller firms, with specific expertise in certain jurisdictions being involved, representing both the bidders and the targets. Similarly the international firms involved in these deals is no longer limited to a handful of names and more international firms are setting up official Israel desk to try to emphasize their experience in Israel and maximize on new opportunities.