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2019 Was a Record Year for Israeli Exits

Last year saw 138 exits, 122 of which were mergers and acquisitions valued at $21.7 billion in total

Meir Orbach 17:2114.01.20
The past decade saw Israeli tech grow and prosper: the industry as a whole pocketed over $111 billion from 1,210 exits, according to a Tuesday report by Israel-based research firm IVC Research Center and Israel-based law firm Meitar Liquornik Geva Leshem Tal.

 

Last year was an especially good one, according to the report: it saw 138 exits, 122 of which were mergers and acquisitions valued at $21.7 billion in total. In contrast, 2018 saw 122 deals, 106 of which were mergers and acquisitions worth just $12.6 billion in total. In fact, discounting Intel’s 2017 acquisition of Mobileye—an aberration on all accounts at $15.3 billion—2019 is the record year for Israeli exits. Like in 2018, U.S. companies were responsible for 80% of all mergers and acquisitions.
Tel Aviv. Photo: Shutterstock Tel Aviv. Photo: Shutterstock
Two phenomena over the last decade produced these impressive results. The first is the global economy’s minuscule interest rate, which in some markets reached negative rates. This led institutional investors to turn to tech as an industry with potential for high returns. The second phenomenon was an acceleration in technological development, especially in the cloud and artificial intelligence domains. Demand for these technologies boosted demand for cybersecurity systems. Alongside the success of companies like cloud security company Check Point Software Technologies Ltd. and information security company Imperva Inc., a new generation of cyber companies was born, founded by veterans of Israel’s military tech units.

 

The demand for cyber, cloud, and artificial intelligence technologies launched an arms race between multinationals for Israeli talent. At the top are America’s tech giants Google, Facebook, Amazon, Intel, Microsoft, and Apple, who all earned their place on the big buyers’ list of the decade. But a new category has also made itself known—private equity and venture capital funds, which made acquisitions with the intention of elevating companies. This acquisition route, once considered inferior, became a preferred choice for many funds, the best example being Insight Partners investment in IoT security company Armis Inc., the acquisition of which it announced last week.

 

Intel was the most active multinational corporate buyer in Israel over the last decade, buying 10 companies for a total of $17.7 billion—with $15.3 billion allocated for Mobileye and $2 billion for intelligence chip developer Habana Labs Ltd. Other prominent buyers were Palo Alto Networks Inc., Google, Medtronic PLC, Microsoft, Apple, and Salesforce.com Inc. 2019 also saw the arms race peak with two acquisitions of over $1 billion: Habana Labs’, announced in December, and Insight’s $1.1 billion acquisition of Armis, announced earlier this month.

 

The Israeli tech industry has been going through a challenging maturation process in recent years. From an industry that saw most of its companies acquired the moment they reached technological maturity, it became an industry where most companies achieve higher valuations as a result of reaching their business maturity as well. A good example is Salesforce’s acquisition of marketing analytics company Datorama Ltd. in 2018 for over $800 million.

 

Another aspect of the industry’s maturity is the merger between the two global leading viral content distribution companies, Taboola.com Ltd. and Outbrain Inc., who were bitter rivals for years. The two companies came to realize their size is a very significant factor in their survival, as their direct competition in the advertising industry is Google and Facebook.

 

2019 was a record year for private company exits valued at over $100 million—26 such deals compared to 14 in 2018 and 18 in 2017. 2019 was also the best year of the decade for venture capital funds—VC-backed exits reached $7.1 billion in 2019, compared to $2.7 billion in 2018. The data collected in the report indicates an upward trend in the valuation of private companies, which is also expressed in a decrease in the number of private companies making exits valued at under $20 million. There were 66 such deals in 2019 compared to 70 in 2018.

 

2019 also revealed an increase in the number of companies raising rounds of over $30 million, for a total investment of $5.1 billion across 68 companies this past year, compared to $3.3 billion across 64 companies in 2018. In most cases, these are companies valued at over $100 million, meaning they have the potential for exits worth $500 million or more. This impressive group of companies that raised large rounds could hint at a wave of even larger rounds in 2020, as companies that raised $30 million will now be looking to raise rounds of between $70 million and $120 million in the hopes of reaching unicorn status.