Israeli startups and high-tech companies were sold for $6.22 billion in the first half of 2018, according to a new report released this week by Israel-based IVC Research Center and law firm Meitar Liquornik Geva Leshem Tal.
The first six months of the year had 58 exits take place, including two billion-dollar deals that made up 73 percent of the total amount of exits. Israeli electronics and industrial products manufacturer Orbotech was bought by California semiconductor equipment maker KLA-Tencor Corp. in a $3.4 billion deal in March 2018 in one of the largest buyouts of an Israeli company to date. In May, private equity firm Permira bought back part of TV software solutions company NDS from American tech giant Cisco, which had acquired the Jerusalem-based video and security specialist for $5 billion in 2012.
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The figures reflect a dramatic increase in funded exit activity, as the average exit in the first quarter of 2018 soared to $107 million in 2018, compared to $31 million in H1 2017. This is due to the two exceptional mega-deals, without which the average exit for H1 2018 would be $32.5 million – slightly higher than in 2017 but down by almost 50 percent from the averages in 2016 and 2015.
The report also noted that the number of total exits in the first half of the year sank 20 percent in line with the downward trend that began in the first half of 2015. There were 72 exits in the first half of 2015, 68 exits in the first half of 2016, 63 exits in the first half of 2017, and 58 exits in the first half 2018.
Exits in Israel are usually mergers and acquisitions and in 2018, it was no different. Fifty-three of the 58 exits for H1 2018 were M&As totaling $1.71 billion, with just three IPOs totaling $115 million.
Alon Sahar, a partner at Meitar Liquornik Geva Leshem Tal, says “it’s important to draw attention to the connection between capital raising and mergers and acquisitions or public offerings. In recent years, there has been an increase in the number of companies raising a significant amount of high-value capital. In 2016, 27 companies raised capital of $30 million or more. In 2017, the number of companies doing so increased, and in the first half of 2018 another record was broken, with 26 companies raising more than $30 million.
Marianna Shapira, Research Director at IVC Research Center, explained in a statement that “the decline both in number and amounts of exits indicates that 2018 is going to finish with poor exit performance,” though she offered that the annual exit activity may rise should there be strong showings in the second half of the year.
Companies in the fields of life science and IT/software had the largest share in number of exits in the first half of 2018, according to the report. The life science exits’ share climbed to 21 percent compared with just six percent in the first half of 2014.
The three IPOs in the first half of 2018 were life science companies, including skin medication company Sol-Gel, oral drug delivery firm Entera Bio, and endoscopy MedTech company Motus GI Medical. Only these three IPOs were completed in the first half, compared to eight completed in the first half of 2017.