Israeli M&As fell by 50% during COVID - report

More than half of the deals in 2020 were in hi-tech (5.1b.), followed by the energy ($1.8b.) and food ($1.6b.) sectors.

The logo of Nvidia Corporation is seen during the annual Computex computer exhibition in Taipei, Taiwan (photo credit: REUTERS/TYRONE SIU)
The logo of Nvidia Corporation is seen during the annual Computex computer exhibition in Taipei, Taiwan
(photo credit: REUTERS/TYRONE SIU)
The coronavirus pandemic hampered the market for Israeli mergers and acquisitions in 2020. The total value of Israeli M&A deals fell by 50% to about $10 billion, while the number of M&A deals declined by 26% from the previous year to 123, according to a report by PwC Israel published Tuesday.
The report did not include the massive $7 billion acquisition of Israeli chipmaker Mellanox by Nvidia in April, which is considered the third-largest exit in Israeli history. PwC's methodology excludes deals above $5 billion because they tend to distort averages and total sums.
"The response of global markets to the pandemic was even sharper and faster than during the great recession a decade earlier," the report said. "However, there is an expectation that we will recover from the crisis faster than in 2008, as is already being seen in global markets."
The data shows a clear progression of the market's decline, PwC said. M&A activity stayed on a growth trend during the first half of the year, but dropped by 50% starting in the third quarter. Notably, acquisitions by foreign investors remained on track in the first six months of 2020, but tapered off in Q3, when only six deals were made, from an average of 20 in previous years.
Besides the Mellanox deal, the largest deals of the year were Israel Electric's sale of its Ramat Hovav power plant for $1.2b.; the $1.2b. acquisition of medical laser company Lumenis, and the $1.1b. purchase of cybersecurity firm Checkmarx.  
More than half of the deals in 2020 were in hi-tech (5.1b.), followed by the energy ($1.8b.) and food ($1.6b.) sectors.
Of all deals, 30% were worth more than $100 million, while 70% were worth less than that much, the least favorable such breakdown since 2012. The average transaction value decreased to $154 million, or $256 million when the Mellanox deal is included. There were five billion-dollar deals during the year, only one of which was in the second half of the year.
Acquisitions by foreign investors fell 57% to $6.3 billion, while acquisitions by Israeli companies more than doubled to $3.4 billion. That was in line with the global trend during the pandemic of large companies acquiring local players while global trade slowed.
PwC remains optimistic about the acquisition market for 2021. "The amount of money available in the market and the low interest rate environment that allows for cheap fundraising provides a cushion for the economy's rehabilitation and will create opportunities for companies with financial strength. The M&A market among S&P 500 companies in the US already reflects the tendency of strong companies to make more transactions during the corona period compared to last year."