There was a 70% jump in overall M&A deal value in Israel in 2021, compared with 2020, according to the PwC Israel 2021 M&A Report, which was released today. Average deal value dropped in 2021 to $126 million, which represents an 18% decline, (excluding exceptional transactions), over last year’s total.
The number of deals that closed this year rose to 238, the highest total in the past decade and almost double the number of deals in 2020. Due to the choice of many companies to take the IPO route or merge via SPAC, the number of megadeals fell this year. Only one deal, the acquisition of Lumenis, closed at more than $1 billion, as compared to five such megadeals in 2020, PwC Israel said.
The number Israeli companies acquired by Israeli companies amounted to 82 transactions totaling in $2.8 billion, compared with 46 deals in 2020. Of these, 44 deals were in the tech sector, totaling $1.5 billion, and 12 deals were in services and consumer products, totaling in $291 million.
PwC Israel partner and transaction services leader Liat Enzel-Aviel said, "We’re wrapping up a record-breaking year in terms of the number of deals, which stemmed in part from the large appetite of companies to make acquisitions. This occurred at a time when some of them compromised on various parameters, such as price and the maturity of the solution that was acquired, with their goal simply being to close the deal."
She added, "One cause of this phenomenon was the amount of available cash in the market, while at the same time, large IPOs like ironSource, Taboola and others, added more companies to the circle of investors. These companies designated M&As a major pillar of their growth strategy and directed lots of money toward this activity. The considerations for acquisitions included, among others, rapid achievement of technological improvement, attainment of a competitive advantage in the market, expansion of market share and creation of new markets."
The rate of deals by Israeli investors trended upward to 40% of the total acquisitions value. 2021 also saw many acquisitions of overseas companies by Israeli players. 60% of the year’s total transaction value came from foreign investors who acquired Israeli companies and of the other 40% in which the buyer was an Israeli company, 16% stemmed from local deals (where both parties were Israeli). The remaining 24% of acquisitions by Israeli companies, with a total value of $4.1 billion, involved the acquisition of foreign companies. This reflects a sharp climb compared with 2020, when Israeli acquisitions of foreign companies amounted to only $333 million.
The year’s most notable overseas transactions by Israeli buyers included the Azrieli Group’s acquisition of Green Mountain data centers ($860 million) and Taboola’s acquisition of Connexity ($800 million).
Looking to 2022, Enzel-Aviel said, "The uncertainty that characterized 2020 and the pandemic crisis period continues to wane and we are seeing a strengthening of the economy and a trend of recovery, globally and, in particular, locally. From many standpoints, 2020 was in the realm of a slightly worrisome wound, while 2021 showed significant growth and even a return to pre-pandemic trends in many ways."
She continued, "The amount of available money, together with the low interest rate environment, the large appetite of investors and the desire of companies to attain technological capabilities and competitive advantages will continue to feed the M&A market and the economic rehabilitation process, along with recovery from the crisis. "In addition, in light of the IPOs, the substantial fundraising rounds and the amount of ready cash held by these companies, we expect they will join the circle of investors and will continue to fuel the local market, as we have been starting to see over the past few months," she concluded.
Published by Globes, Israel business news - en.globes.co.il - on December 23, 2021.
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