Disruption and innovation are driving deals to new heights in the Israeli M&A market. In 2016, there were 99 deals with an Israeli target worth a total of US$20 billion, a record in value terms and a joint record (shared with 2015) by volume.
The US$15.3 billion in deals recorded in Q1 2017 is already the second-highest annual value on record, with three quarters left to run. And according to White & Case’s new survey report Innovation drives dealmaking: Outlook for M&A in Israel, dealmakers are optimistic about the future for the market. The vast majority of respondents (86%) expect 2017 deal activity to remain high or even increase compared to 2016.
The bulk of M&A value during the first quarter came down to Intel’s US$14.7 billion acquisition of Mobileye, a developer of advanced driver assistance systems. That transaction highlights the trend of emerging technologies being adopted by adjacent industries, with more cross-sector deals underpinned by technology expected in the near future. The deal pushed the Industrials and Chemicals sector to the top of the value charts, with 25 deals worth US$21.9 billion through 2016 and the first quarter of 2017. But in terms of volume, Technology, Media & Telecommunications (TMT) was the clear winner: The sector notched up 45 deals worth US$7 billion during that same period.
Respondents to the White & Case survey indicate that cybersecurity is the hottest tech sub-sector, with 67% ranking it in their top three. Israel owes most of its cybersecurity expertise to its advanced military: Its computing division, Unit 8200, releases thousands of veterans equipped with world-class hacking skills every year, many of whom launch start-up ventures or join existing companies.
Meanwhile, when it comes to challenges, almost half of respondents believe the regulatory environment in Israel is more difficult to navigate than in other developed economies. That said, government measures are expected to add to deal flow in Israel. The implementation of the Anti-Concentration Law is likely to stimulate competition by turning many Israeli holding companies into sellers, providing ample M&A opportunities in the near future.