The PwC Israel 2015
Hi-Tech Exit Report
Another amazing year for Israeli Hi-Tech exits
M&A is up 44%
Israeli hi-tech continues to provide investors with an impressive string of exits, with total deal value of more than $5bn for the fifth straight year. The Israeli market seems to have grown desensitized to the news of yet another exit. But, that's quite unjustified, because this is actually quite amazing, on a global scale.
More M&As, less IPOs
The growth of M&As this year was robust, with an increase from $5bn in 2014 to $7.2bn in 2015. Meanwhile, IPO activity by Israeli companies dimmed in 2015, from $9.8bn for 18 IPOs in 2014 to $3.5bn for 8 companies in 2015, mainly due to effect of the $5.3bn Mobileye IPO in 2014. The decline in IPOs is driven by several factors. First, the window of opportunity has been closing in the US and the UK. It is not completely closed just yet, but certainly narrowed in 2015. Second, cheap private money is a very significant contributor to the decrease in IPOs. Only recently we have witnessed companies that were unable to raise in IPOs at the same valuations as they did in private placements. When the public markets do not give the higher valuation, the number of IPOs is set to go down. Only recently we have seen the Square IPO, which went public at a lower valuation than reflected by its last private round. Square is not alone in this. Quite a few Israeli companies find it easier to raise private capital with higher valuations, which make it less attractive to go public, if at all. Finally, decision makers in the high-tech industry no longer seek
small-to-medium IPOs and want to grow companies to unicorn status before listing, which requires a higher level of company maturity, and takes longer to achieve. The increase in M&A deals is virtually fully explained by an increase in the number of deals, from 52 to 62. This increase is driven by continued appetite by large multinationals to use their massive cash holdings to acquire innovative future technologies as the best way to preserve value in the current environment of super-low returns. Some of these funds are actually "locked" in tax structures that make the acquisition strategy seem even more attractive.
Who's buying?
Israeli hi-tech remains a focal point for international M&A deals. We have grown accustomed to the presence in Israel of global giants like Facebook, Apple, IBM, Qualcomm, Microsoft, Intel and more, which is actually far from being obvious. This year we have seen some new players in the local M&A market such as ARM, Amazon and Zynga. Israeli companies, such as Checkpoint, Mellanox, IronSource and Wix are also actively or potentially in on the action. The most active buyer by far is Microsoft with 5 acquisitions in 2015. In 2015, 56 buyers acquired 62 companies, versus 49 buyers that acquired 52 companies in 2014.
While ranked top in terms of the number of delegations to Israel and interest they show, the Chinese are still on the sidelines
and have not made significant acquisitions of Israeli hi-tech companies. However, the Chinese do make investments in Israeli hi-tech, and have made quite a few acquisitions in other industries, so it's possible to assume that it is a matter of time before they get into the game.
Looking ahead
The expected further hike of interest rates in the US and the belief that the economy is recovering out of "the seven lean years" since 2008, may impact the availability and alternative price of private money, and indirectly impact exits in Israel, given other investment opportunities. But, in fact, there are arguments that actually show why those changes can even intensify M&A activity in Israel. Be it as it may, such transitions take time to play out, and so, it is fair to assume that 2016 will also be buzzing with M&A activity. The amounts currently invested in Israeli hi-tech is unprecedented, and it seems that this will bear fruits in the form of more innovative companies that will keep Israeli hi-tech rolling forward. The bottom line is that at this juncture, Israeli hi-tech have all ingredients to continue producing larger than ever exits.
Wishing you a great year, Rubi Suliman Hi-Tech Leader PwC Israel RubiSuliman Hi-Tech Leader PwC Israel www.pwc.com/il
Exits by years
Total annual exits IPO & M&A 2007-2015 ($ in millions):
Total annual exits - M&A only
2011 - 2015 ($ in millions):
Total annual exits - IPO only
2014 - 2015 ($ in millions):
2007 2008 2009 2010 2011 2012 2013 2014 2015 Total amount
$ in millions 3,522 2,681 2,572 1,176 5,078 5,567 7,643 14,850 10,695 Number of deals 88 84 73 23 63 50 45 70 70 Average deal size 40 32 35 51 81 111 170 212 153
5,078 5,567 6,420 5,024 7,219 63 50 39 52 62 81 111 165 97 116 0 50 100 150 200 250 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2011 2012 2013 2014 2015 Total amount Number of deals Average deal size 9,826 3,476 18 8 546 435 0 100 200 300 400 500 600 0 2,000 4,000 6,000 8,000 10,000 12,000 2014 2015
Total amount Number of deals Average deal size
3,522 2,681 2,572 1,176 5,078 5,567 7,643 14,850 10,695 88 84 73 23 63 50 45 70 70 40 32 35 51 81 111 170 212 153 0 50 100 150 200 250 300 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total amount Number of deals Average deal size
www.pwc.com/il
Opening remarks
Exists by years
Exits by sector
•General
•Detailed
Exits by deal size
Annual IPO vs. M&A
Buyers by geography
Contact
Communications 3% Cleantech 7% Internet 6% IT & Enterprise Software 42% Life Sciences 33% Miscellaneous Technologies 4% Semiconductors 5% 2015 Communications 10% Cleantech 3% Internet 12% IT & Enterprise Software 21% Life Sciences 15% Miscellaneous Technologies 1% Semiconductors 38%
2014
2013
Total annual exits by sector (IPO & M&A) 2013 - 2015
($ in millions):
2015
Life Sciens Internet IT & Enterprise
Software Communications Semiconductors Cleantech
Miscellaneous Technologies 2013 1,276 554 1,798 1,116 812 10 1 2014 2,251 1,841 3,084 1,444 5,690 430 110 2015 3,574 672 4,511 267 493 763 416 0 1,000 2,000 3,000 4,000 5,000 6,000
2014
Exits by sector (General)
Opening remarks
Exists by years
Exits by sector
•General
•Detailed
Exits by deal size
Annual IPO vs. M&A
Buyers by geography
Contact
Total annual exits by sector (IPO & M&A) 2006 - 2015
($ in millions):
Communications
*No large deals were closed in the communications sector, compared to 2014 with the $900mn Viber deal.
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* Total amount 574 537 234 338 302 768 1,116 1,206 1,444 267 Number of deals 20 25 18 14 4 11 10 8 9 5 Average deal size 29 21 13 24 75 70 112 151 160 53
0 20 40 60 80 100 120 140 160 180 0 200 400 600 800 1,000 1,200 1,400 1,600 Communications
Cleantech
Internet
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* Total amount 122 444 235 27 162 1,480 554 2,142 1,841 672 Number of deals 3 11 11 12 5 15 10 9 16 18 Average deal size 41 40 21 2 32 99 55 238 115 370 50 100 150 200 250 0 500 1,000 1,500 2,000 2,500 Internet
*Growth in the Cleantech sector in 2015 driven by the SolarEdge IPO.
*No large, exceptional deals were closed in the internet sector, compared to 5 IPOs with total value of $1.4bn.
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* Total amount 9 95 87 593 0 25 10 35 430 763 Number of deals 5 3 6 3 0 1 1 1 5 3 Average deal size 2 32 15 198 0 25 10 35 86 254
0 50 100 150 200 250 300 0 100 200 300 400 500 600 700 800 900 Cleantech
Exits by sector (Detailed)
Opening remarks
Exists by years
Exits by sector
•General
•Detailed
Exits by deal size
Annual IPO vs. M&A
Buyers by geography
Contact
IT & Enterprise Software
Life Sciences
Semiconductors
*Growth in the corporate IT and software in 2015 was mainly driven by a significant growth in the number of deals
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* Total amount 6,669 1,395 1,088 416 347 945 1,798 1,332 3,084 4,511 Number of deals 38 23 26 17 6 22 10 11 23 29 Average deal size 175 61 42 24 58 43 180 121 134 156
0 20 40 60 80 100 120 140 160 180 200 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
IT & Enterprise Software
*Growth in the life sciences sector in 2015 was mainly driven by the $1.8bn Novocure IPO.
*In 2014, $5.3bn are attributed to the Mobileye IPO.
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* Total amount 724 220 920 778 18 488 1,276 2,471 2,251 3,574 Number of deals 16 11 11 15 3 6 9 13 14 8 Average deal size 45 20 84 52 6 81 142 190 161 447
0 50 100 150 200 250 300 350 400 450 500 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 Life Sciences 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* Total amount 1,883 672 80 419 341 1,046 812 458 5,690 493 Number of deals 5 7 5 6 3 4 8 3 2 4 Average deal size 377 96 16 70 114 261 101 153 2,845 123
0 500 1,000 1,500 2,000 2,500 3,000 0 1,000 2,000 3,000 4,000 5,000 6,000 Semiconductors
Total annual exits by sector (IPO & M&A) 2006- 2015
($ in millions):
Opening remarks
Exists by years
Exits by sector
•General
•
Detailed
Exits by deal size
Annual IPO vs. M&A
Buyers by geography
Contact
Exits by sector (Detailed)
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* Total amount 1,883 672 80 419 341 1,046 812 458 5,690 493 Number of deals 5 7 5 6 3 4 8 3 2 4 Average deal size 377 96 16 70 114 261 101 153 2,845 123
0 500 1,000 1,500 2,000 2,500 3,000 0 1,000 2,000 3,000 4,000 5,000 6,000 Semiconductors www.pwc.com/il
7% 36% 24% 26% 4%3%
2015
<$10M$10M to $50M $50M to $100M $100M to $500M $500M to $1B >$1B 7% 33% 7% 49% 3% 1%2014
<Exits by deal size ($ in millions):
2014
2015
3 22 5 11 4 0 5 23 5 34 2 1 5 25 17 18 3 2 0 5 10 15 20 25 30 35 40 <$10M $10M to $50M $50M to $100M $100M to $500M $500M to $1B >$1B 2013 2014 2015Opening remarks
Exists by years
Exits by sector
•General
•Detailed
Exits by deal size
Annual IPO vs. M&A
Buyers by geography
Contact
Total amount ($ in millions)
Average deal size ($ in millions) :
Annual IPO vs. M&A
M&A, 62, 89% IPO, 8, 11% תואקסע רפסמ M&A, 7,219, 68% IPO, 3,476, 32% הס " תואקסע כ ) רלוד ינוילימב ( M&A, 116 IPO, 435 0 50 100 150 200 250 300 350 400 450 500
תעצוממ הקסע לדוג
)
רלוד ינוילימב
(
Number of deals
70
10,695
Opening remarks
Exists by years
Exits by sector
•General
•Detailed
Exits by deal size
Annual IPO vs. M&A
Buyers by geography
Contact
Company Name
Sector
Adap.tv,
IncInternet
CyOptics,
IncCommunications
dbMotion
LtdLife
SciencesGiven
Imaging LtdLife
SciencesIntucell
LtdCommunications
PrimeSense
LtdSemiconductors
PROLOR
Biotech, IncLife
SciencesScaleIO,
IncIT
& EnterpriseSoftware
Trusteer
LtdIT
& EnterpriseSoftware
Buyers by geography
Number of M&A deals
Total amount of M&A deals ($ in millions)
7, 11% 3, 5% 36, 58% 16, 26%
תואקסע רפסמ
הפוריא היסא ב"הרא לארשי 317, 4% 465, 7% 5,700, 79% 738, 10%הס
"
תואקסע כ
)
רלוד ינוילימב
(
הפוריא היסא ב"הרא לארשי 7, 11% 3, 5% 36, 58% 16, 26%Number od deals
Europe Asia USA Israel
7,219
62
Opening remarks
Exists by years
Exits by sector
•General
•Detailed
Exits by deal size
Annual IPO vs. M&A
Buyers by geography
Contact
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*The report refers to both asset purchase and share purchase M&A deals of Israeli companies or companies that have a significant Israeli affiliation.
** The report refers only to exits with a value greater than $5 million and exits where the exit amount was made public.
***2007-2015 data based on IVC database.
An exit is defined as either closing of a share acquisition deal asset acquisition deal or activity by a target company for cash or shares of the buyer. An exit is also an initial public offering (IPO) on any stock exchange. IPO values are based on IPO pricing.
