Israeli tech M&A deals reach new peak - report

According to Vintage Investment Partners, M&A deals reached a new record of this year of $10.5 billion, 22% higher than the previous peak in 2021.

This year too, Israel’s technology industry presented record figures for mergers and acquisitions. According to a new report from Vintage Investment Partners, M&A deals set a new peak this year of $10.5 billion, 22% higher than the previous peak of $8.6 billion in 2021.

Vintage managing partner Asaf Horesh said that a particularly interesting figure in this report was the proportion of international buyers, 78% of all deals. Among this year’s outstanding deals: the acquisition of WalkMe by SAP for $1.5 billion and that of BioCatch by Permira for $750 million. In addition, after two years of slowdown, technology giants such as Microsoft and Applied Materials have renewed their acquisition activity in Israel.

On the other hand, the venture capital sector in Israel is undergoing significant change. The number of new funds fell by 35% (from 40 in 2023 to 26 in 2024), but the average amount of capital raised per fund rose sharply from $125 million to $202 million. "We are witnessing a process of consolidation in the sector," Horesh explains. "Investment institutions prefer large funds with a proven history."

Another change in the high tech sector is that, according to the report, the number of new companies founded by experienced entrepreneurs rose by 25%.

All these factor affected patterns of investment this year. While aggregate capital raised by companies fell by 12% (from $9.2 billion in 2023 to $8.1 billion in 2024), and the number of deals fell from 682 to 434, the average amount per deal rose by 37%.

Unsurprisingly, artificial intelligence continues to stand out as the main growth engine in the market. According to the figures in the report, the share of AI investments in the total amount of deals rose from 26% in 2023 to 41% in 2024. "Young AI companies are raising tens of millions of dollars at early stages, mainly because of the need for expensive computer infrastructure," Horesh says.

How the data are collected

The report is based on several sources, among them research company PitchBook and Israel database IVC. Vintage’s analysis covers more than 4,000 investment funds and some 33,000 companies. Its figures are updated to September 2024, while forecasts for the final quarter of the year are based on special models that take into account time lags in the reporting of deals. To allow for comparison between different markets, all the deals are translated into US dollars at the average exchange rate for the year.

"The market is undergoing process of maturation," Horesh says. "The transition from growth at any price to sustainable growth, together with the peak in M&A deals, indicates the robustness and maturity of the Israeli technology industry."

Adv. Guy Lachmann, a partner in the Hi-Tech Practice Group at the Pearl Cohen law firm, who attended the unveiling of the report, said, "The quality of Israeli technology continues to lead, and we’re seeing exceptional investment opportunities in fields other than cyber," but added, "For many European and Asian investors, investment in Israel at this time is seen as too complicated and challenging, and unfortunately many of them have lost interest in us. But investment deals continue and new ones are beginning, mostly at relatively modest valuations, amid very cautious and considered conduct on the part of investors."

Published by Globes, Israel business news - en.globes.co.il - on December 5, 2024.

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