Israeli Startups ‘Exit’ For $10 Billion In 2016

By Einat Paz-Frankel, NoCamels January 03, 2017 3 minutes

Money via Flcikr

Israeli high-tech and startup companies were sold for a whopping $10.02 billion in 2016 – to other companies or through initial public offerings (IPOs) – according to a report released today by IVC Research Center and law firm Meitar Liquornik Geva Leshem Tal.

The figure reflects a 12 percent increase over 2015, primarily due to the acquisition of social gaming company Playtika for $4.4 billion. In one of the largest “exits” in Israel’s history, a consortium of Chinese companies led by Shanghai Giant Network Technology, one of China’s largest online gaming companies, acquired Playtika from Caesars Interactive Entertainment.

Israeli high-tech exits by type: IPO, M&A and Buyouts, 2012-2016 ($B) by IVC Research Center.

According to the IVC-Meitar High-Tech Exits Report, Israeli startup companies closed 104 deals last year. The figure includes 93 mergers and acquisitions totaling $8.8 billion (including the Playtika deal), eight buyouts that generated $1.22 billion, and three small IPOs garnering $15.1 million.

The second-largest deal in 2016 (behind Playtika) was the $811 million acquisition of Israeli company EZchip by another Israeli company – Mellanox. This deal, along with the Leaba acquisition by Cisco and Sony’s acquisition of Altair, established the semiconductors sector as a leader in 2016 exits, with an all-time record of $1.39 billion.

Also unique to 2016 is the following figure: 27 percent (more than one-quarter) of the mergers and acquisitions involved Israeli high-tech companies that were both on the acquiring and on the acquired sides.

“An obvious slowdown”

However, the astronomical sum of all these exits does not mean all is rosy in the Startup Nation. Excluding the $4.4 billion Playtika deal, the editors of this latest report acknowledge a slowdown in the Israeli high tech industry. At the IVC-Meitar conference held today in Tel Aviv, IVC CEO Koby Simana said there were fewer deals in 2016, and hardly any IPOs.

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Attorney Alon Sahar, partner at Meitar Liquornik Geva Leshem Tal, said that “following several years of growth both in terms of deal numbers and their proceeds, 2016 presents an obvious slowdown.”

His analysis (excluding the Playtika deal) yields “figures that are substantially lower than in previous years,” he said and added that “it’s impossible to tell whether this is the beginning of a new trend or a natural correction due to significant hikes in previous years.”

Excluding buyouts and mega-deals, the average acquisition price in 2016 was $46.3 million, 31 percent below the previous year’s average. However, Simana remains optimistic.

“Entrepreneurs and investors may not be pushing for exits as they once did,” he says. “Instead, they choose to wait patiently, opting for company growth.”

Two reports, different results

While today’s IVC-Meitar report includes the Playtika deal, a report released two weeks ago excludes it, since Playtika was previously sold in 2014 to Caesars Interactive Entertainment, a North American corporation.

Last month, accounting firm PwC reported that Israeli startup exits totaled $3.5 billion in 2016, a 67 percent decline. PwC’s report excludes the $4.4 billion Playtika deal and a host of small exits IVC chose to include in its report. IVC also tends to be more inclusive, perceiving more companies as Israeli, compared to the more conservative reports released by PwC.