Israeli M&A Deals Up 34%, But Deal Value Falls 6% To $20.4B – Report

The number of merger and acquisition deals in Israel were up 34 percent in 2019 with 166 deals made this year, compared to 124 deals in 2018, according to a new report released by PricewaterhouseCoopers (PwC) Israel this week.

The overall value of a deal reached $20.4 billion, which was a six percent decrease from $21.6 billion in 2018, but still reflects “more vigorous deal activity” and “an above-average value relative to recent years,” PwC said in the report.

The number of deals in the range of $400 million to $1 billion more than doubled this year, from four deals in 2018 to nine deals in 2019. The nine deals accounted for 42 percent of all activity, according to the data. Contrarily, deals over $1 billion decreased to four, down from five in 2018.

The high-tech segment led the pack this year with $9.1 billion in deal value, followed by the production industry with $4 billion. The industrial production sector is prominent, the report said, thanks to the $3.4 billion acquisition of electronic and industrial products manufacturer Orbotech by California semiconductor equipment maker KLA-Tencor.

The pharma sector, on the other hand, continues to weaken in the wake of low activity levels by Teva Pharmaceutical Industries, the US-Israeli firm that used to be a key player in that segment and the M&A market at large.

The value of deals by US entities was $11.5 billion in 2019. Though the number was lower than the $12.9 billion in 2018, the “strong figure” of 2019 comes “in spite of the US tax reform, which shifted conditions for offshore investment.” PwC said this was a strong show of faith by US investors in Israel companies.

East Asian players continued to be active in the local deal market, with 10 deals this year, up from eight last year. But the average deal price tanked to $75 million, compared to $452 million and $112 million in 2017 and 2018, respectively. The report said this “highlights that investors from this region, Chinese in particular, are struggling to make large deals in the local market” because of political and regulatory considerations.

“2019 was a vibrant year for M&As, despite predictions of a looming global recession and retreating stock markets at the beginning of the year. Past experience tells us that a downturn is inevitable, however, a more founded market and the new factors existing in the global economy may cushion any impact on the Israeli M&A scene. That being said, the Israeli M&A market is not showing any signs of slowing down,” Liat Enzel-Aviel, partner and transaction services leader at PwC Israel, said.

“The constant streak of over-$100 million deals illustrates top managements’ desire to get into the action at later stages of their business for higher returns, and the high price environment supported by the global economy,” she added.