Israel has become renowned as a strong start-up haven over the last year, with its technology sector, in particular, proving particularly strong. Indeed, Israel’s technology hub, dubbed Silicon Wadi, is widely seen as second only to California’s Silicon Valley in terms of important tech centres on Earth. At the same time, the whole country is being seen as an attractive proposition for private equity (PE) investment as well as for merger and acquisition (M&A) specialists.
It was something of a surprise, then, when Reuters reported over the last week that the value of PE deals in Israel plunged by 39% in 2013. Perhaps an even bigger surprise was the news that the industrial, not technology, sector that had pulled in the vast majority of total investment, which stood at a value of $2.2billion for the whole year.
However, in terms of Israel being seen as an attractive hub for foreign interest and investment, it isn’t all bad news. Israeli PE investment was the lowest it has been in the last three years, at just $519million. In contrast, the biggest foreign buyout in the country for 2013 pulled in $500million, proving there is still a great deal of interest in Israel from abroad, even if Israeli PE firms are looking beyond their own borders and to mainland Europe and elsewhere in the Middle East with increasing regularity.
Reuters reported that Israel was expecting 2014 to be a better year following the passing of a law designed to increase competition across PE markets, although it will be interesting to see whether Israeli investment continues to look elsewhere. It is unknown to what degree foreign investment is pushing out Israeli PE companies or whether seeking foreign investment is merely a strategy of these firms.
Rick Mann, head of M&A at corporate law firm GKH, told Reuters, “Because of the large number of companies that are expected to be on the shelf as a result of Israel’s recent legislation to restrict economic concentration and holding company structures, we believe that the coming year will offer significant opportunities for PE investment.” Reuters’ figures were sourced from the IVC Research Center.