from the January 2016 issue

Israeli VC 2015 fund raising up to $1.5b

IPO exits slowed down in 2015, following an exceptional 2014. Eight Israeli high-tech IPOs accounted for $609 million, a mere 7% of the total exit proceeds in 2015, compared to 2014's outstanding 27%. The number of deals was lower than expected, as many companies shelved their IPO plans after worldwide IPO markets in general, and Nasdaq in particular, no longer seemed to offer favorable conditions for initial public offerings.

Still, the top three IPOs of 2015 all exceeded $100 million in proceeds and accounted for 70% of the amount raised in IPOs during 2015. The top three IPOs were performed on Nasdaq. They were by Novocure ($165 million) and Chiasma ($117 million) in life sciences and SolarEdge ($145 million) in the cleantech sector.

On prospects for IPOs by Israeli companies, Meitar Liquornik Geva Leshem Tal partner Dan Shamgar said, "Throughout 2015, the American capital market was not particularly receptive for IPOs, therefore Nasdsaq IPOs were chosen as an alternative only by a small number of companies. Looking ahead, it seems the IPO market will remain mostly closed for most companies, at least in the first few months of 2016. The M&A market however will remain active. On the acquirers' side, along with seasoned acquirers such as Microsoft we see a trend of new buyers joining the exit market in Israel. In the past year, such new players included conglomerates such as Infosys and Amazon, and we believe additional strategic players will perform acquisitions in order to establish their presence in Israel."

In M&A deals, the trend is towards larger deals, with the number of deals below $50 million dropping while the number of larger deals increased. The size of the average M&A deal in all groups increased compared to previous years, further demonstrating that the increase in average deal size is not a statistical oddity, nor a result of a few extremely large deals - it reflects a real trend for M&A activity. Israeli high-tech companies were also on the acquiring side of 30% percent of the M&As in 2015. Twenty-four Israeli or Israel-related high-tech companies chose to expand by directing some of their M&A funds locally, acquiring 26 Israeli high-tech companies, in so-called ‘two-sided Israeli high-tech deals', for a total of $1.18 billion.

While the accepted terminology for exits includes the IPOs and strategic M&As, the report editors suggest another form of deal-making can provide investors with returns, while the company remains independent. Specifically, buyouts involving private equity investors provide an excellent opportunity for the existing shareholders to profitably liquidate some portfolio holdings. In total, seven Israeli high-tech buyouts were performed in 2015, totaling $1.18 billion, somewhat below the $1.74 billion generated by such deals in 2014.

Reprinted from the Israel High-Tech & Investment Report January 2016

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