Israeli hi-tech exits surge to decade high of $21.7b. in 2019

The past year represented the most prolific year for venture capital funds to date

Mellanox CEO Eyal Waldman and Nvidia CEO Jensen Huang shake hands after Nvidia completed a $6.9b. acquisition of the Israeli company in March 2019 (photo credit: OMER TAL)
Mellanox CEO Eyal Waldman and Nvidia CEO Jensen Huang shake hands after Nvidia completed a $6.9b. acquisition of the Israeli company in March 2019
(photo credit: OMER TAL)
Israeli hi-tech companies secured exits worth $21.7 billion in 2019, a decade high, according to a report published Tuesday by IVC Research Center and the Meitar Liquornik Geva Leshem Tal law firm.
A total of 138 exits – IPOs, mergers and acquisitions, and private-equity buyouts – were recorded during 2019, compared with 122 worth $12.6b. in 2018. Between 2010 and 2019, public and private hi-tech companies closed some 1,210 deals worth a total of $111b., the report said.
The full-year transaction value was a decade high, the report said, excluding the $15.3b. acquisition secured by Mobileye in 2017, which was an exceptional transaction that skewed annual comparisons.
The acquisition of Mellanox by Nvidia, still subject to closing, accounted for $6.9b. of the transaction total in 2019. Three other deals exceeded $1b.: Intel’s $2b. acquisition of Habana Labs; Salesforce’s $1.35b. purchase of Click Software; and Baring Private Equity’s $1.2b. acquisition of Lumenis. The largest-ever Israeli private-to-private merger, completed by content platforms Taboola and Outbrain, was also recorded last year.
During the past decade, Intel was the leading acquiring company, purchasing 10 Israeli firms for $17.72b. Cisco acquired four companies for $6.09b., and Covidien/Medtronic purchased eight companies for $3.42b. Google acquired 12 companies, amounting to $1.77b..
“I am very optimistic with respect to the Israeli tech ecosystem in general,” attorney Mike Rimon, a partner at Meitar Liquornik Geva Leshem Tal, told The Jerusalem Post. “The world is moving constantly in a more technological way. Because we have very strong fundamentals of a true technology hub, we will be more and more significant in the world scene.”
Private companies also set a new record for exits, exceeding $100m. in 2019, securing a total of 26 deals, compared with 14 in 2018 and 18 in 2017. A decline in the number of deals below $20m. was recorded in 2019, decreasing from 70 in 2018 to 66 in 2019, reflecting a trend of rising private-company valuations.
“We came to the conclusion that the last decade was a decade of growth,” said attorney Shira Azran Lahat, a partner in Meitar’s Corporate and Securities Group. She cited the decline in lower-value exits and companies being sold for greater amounts.
“We see more experienced founders – what we call serial founders,” Azran Lahat said. “They come with more experience for forming a company. Another factor that contributes to the growth of this industry is the fact that there is a lot of capital available. We see more and more foreign venture capitals, mostly from the US. They are financial investors who will invest in a company’s growth and hope for a higher exit when they sell it.”
Last year was the most prolific year for venture-capital funds to date. There was a large increase in the volume of venture-backed deals, $7.1b. in 2019, compared with $2.7b. in 2018.
There was a continued increase in the total amount of investments exceeding $30m., with 68 totaling $5.15b. in 2019, compared with 64 totaling $3.35b. in 2018. Assuming investments exceeding $30m. represent companies valued at over $100m., such firms represent the pipeline of future high-valuation deals, with investors betting on exits starting at $500m., the report said.
“We see companies with very high valuations but not a corresponding number of exits,” it said. “We won’t see 70 transactions of over $1b., but we’ll still see exits and probably an increasing number. We’ll see more significant buyouts, like the Armis transaction two weeks ago.”
Similar to 2018, American companies were behind approximately 80% of the value of all merger-and-acquisition deals in 2018. Israeli-led deals remained modest and stable, representing 6% of transaction value in 2019. Chinese buyers were insignificant players in terms of the value of deals, leading mergers and acquisitions worth approximately 1% of the annual transaction total, the report said.
Four Israeli companies completed IPOs in the United States in 2019, despite the rising number of growth companies, demonstrating that IPOs on major US stock exchanges currently do not represent a common path to liquidity.