The State Comptroller examined the approval procedures for the establishment of companies and the acquisition of shares in existing companies by the government defense companies IAI, Elta, Rafael and their subsidiaries. from him.
In the dynamic defense market around the world, there are many mergers and acquisitions, which in 2018-2020 reached 367 transactions worth $ 268 billion. In Israel, such actions are subject to the approval of the government or the Government Companies Authority and the Ministry of Defense, and the Comptroller examined the effect of this on the companies’ activities.
According to the auditor, it takes a long time to obtain the necessary approvals, which is cumbersome and harms the activities of companies that compete in the international market. For example, IAI had to wait about 4.5 months to get the approval of the Companies Authority and about 16 months to get the approval of the government. Rafael waited 6.5 months and 10 months, respectively.
The Comptroller further writes that despite the recognition of the Companies Authority and the Ministry of Defense for more than a decade of the need to facilitate the regulation applied to IMI, Elta and Rafael, and despite the processes they have carried out in this matter, they have not yet been able to promote such relief.
The companies are also to blame for the delays, with the IAI board discussing the innovation circular about a year and a half after the date required to do so and Rafael did not map out the barriers to implementing the innovation plan and did not exhaust the opportunity to influence the government decision.
Due to the failures, IAI was unable to advance the decision to establish subsidiaries in certain countries in Europe and Asia and had to change strategy and turn to indirect ownership of foreign companies. Sales in the United States.
State Comptroller Engelman noted in the report that IAI, Elta and Rafael must carry out the mergers, acquisitions and ventures efficiently and in short schedules in accordance with market requirements, inter alia to break into new markets, acquire missing technologies, take advantage of size and even reduce competition threatening them. That the Companies Authority and the ISA will complete an examination of the needs of the defense government companies regarding the relief of the burdensome regulations on the subject, and will act in accordance with the results of the examination to grant the relief, including determining the approval procedures for defense companies’ applications. This is to improve their competitiveness, and increase their efficiency.
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