Our research suggests that M&A activity involving Israeli companies is set to remain strong during 2019 and beyond, despite potential challenges from slower global growth and both regional and international political volatility.
This consistency will not necessarily be underpinned by the same factors that drove such high deal volumes and values in 2017 and 2018. Indeed, several new defining trends in Israel M&A are emerging:
1. Domestic dealmakers are setting the pace
The relative strength of the Israeli economy, its ability to withstand external pressures from both political and economic volatility, and the growing maturity of many Israeli companies make for a powerful combination. Domestic bidders are set to seize a much greater share of Israel’s M&A market.
2. Valuations are rising
Renewed interest from domestic players, innovative companies, record private equity dry powder, and Asia’s hunt for new IP mean that competition for prized assets will be fierce—78 percent of respondents expect competition to rise this year, and it is likely valuations will rise with it.
3. China is on a shopping spree
Whether through acquisition or venture investment, China continues to scour the world for opportunities to invest in new IP and the top talent. With the US increasingly reluctant to welcome Chinese acquirers, Israel’s impressive technology sector is a highly attractive alternative. However, it is worth noting that the US is beginning to look unfavorably on these investments, which could leave Israel in a difficult position.
4. Technology continues to dominate
While Israel’s economy is well diversified, the country's technology sector looks set to drive M&A activity in the immediate future, whether the acquirer is domestic or international. Four of the top-ten deals in 2019 so far have been in the TMT sector. Its disproportionate representation in deal volume figures in particular is only likely to increase.