The consulting company PwC concludes the year 2021 in terms of the volume of mergers and acquisitions in the Israeli economy, when an Israeli company is the acquirer or the acquirer. The data show that 2021 was a record year when the number of transactions almost doubled to 238 transactions, and the financial volume jumped by 70% to $ 17 billion. Despite the jump, it is still down from 2019, the pre-Corona year, when the annual volume of purchases reached $ 20.4 billion.
The high-tech sector continues to lead the mergers and acquisitions market with $ 10.6 billion in 73 different deals. This amount is even higher than the volume of transactions recorded in the peak year of 2019, which stood at $ 9 billion. The PwC firm attributes the increase in acquisitions to investors ’appetite as the corona impact fades away alongside a low interest rate environment and a high amount of available cash.
Despite the increase in the financial volume of all transactions, the average transaction value dropped to $ 126 million, a decrease of 18% from last year, when this year transactions worth more than $ 1 billion were excluded except for the Lumenis transaction, compared to five such transactions last year. The large companies that wanted to raise money this year preferred to turn to the IPOs on the stock exchange in Israel or abroad in IPOs or in SPAC transactions.
The number of transactions of Israeli companies that acquired other Israeli companies increased to 82 with a total value of $ 2.8 billion, compared to only 46 last year. 44 of those $ 1.5 billion deals were in technology.
Another trend that is strengthening is the increase in the rate of Israeli companies applying to purchase a company from abroad. Although 60% of all transactions were by foreign buyers who purchased Israeli companies, out of the 40% of Israeli buyers, the internal division was that only 16% referred to blue and white purchases. “And the other 24% of $ 4.1 billion was Israeli companies that acquired foreign companies, compared to a total of $ 333 million last year. The big deals of this kind were the acquisition of Green Mountain by Azrieli for $ 860 million and the acquisition of Connexity by Tabula for $ 800 million.
Another trend that is emerging is the minority of financial purchases when only 8% of all purchases this year were purchases of this type. A possible explanation provided by PwC is that the financial players were more involved this year in capital raising and high-value transactions and SPAC transactions. On the other hand, there is a jump in the volume of strategic transactions, especially in the high-tech sector, with large companies striving to grow, and more and more companies are turning to mergers and acquisitions as a key factor in their growth strategy. Considerations for acquisitions include achieving rapid technological improvement, gaining a competitive advantage in the market, expanding market share and creating new markets.
Where do foreign buyers come from? This year, too, the United States stands out with 70% of buyers totaling $ 8 billion. Despite the American dominance this is a decline from last year. 13% of buyers came from Europe.
Looking at 2022, CPA Liat Anzel Aviel said: “The uncertainty that characterized 2020 and the period of crisis continues to dissipate and the strength of the economy and the global and local recovery trend in particular is evident. The year 2020 was in many ways a slight blow to the wing as 2021 showed significant growth and even returned to pre-corona trends in many aspects. The amount of money available along with the low interest rate environment, investor appetite and aspiration of companies to achieve technological capabilities and competitive advantages will continue to fuel the M&A market and the process of economic recovery, with the recovery from the crisis. “Furthermore, in light of the issues, significant fundraising and the amount of precedent” unicorns “that have formed among Israeli companies this year as well as the amounts of cash available among these companies, we expect these companies to join the buying circle, and continue to fuel the local market as we begin to see in recent months.
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