Israeli tech M&A deals reach new peak – report

This year again, Israel’s technology industry announced record numbers of mergers and acquisitions. M&A deals hit a new peak this year at $10.5 billion, 22% higher than the previous peak of $8.6 billion in 2021, according to a new report from Vintage Investment Partners.

Asaf Horesh, Managing Partner at Vintage, said a particularly interesting figure in the report was the proportion of international buyers, which was 78% of all transactions. Notable deals this year include SAP’s $1.5 billion acquisition of WalkMe and Permira’s $750 million acquisition of BioCatch. Additionally, after two years of decline, technology giants such as Microsoft and Applied Materials have resumed acquisition activity in Israel.

Meanwhile, Israel’s venture capital sector is undergoing major changes. Although the number of new funds decreased by 35% (from 40 in 2023 to 26 in 2024), the average amount raised per fund jumped from $125 million to $202 million. “We are witnessing a process of consolidation in this area,” Horesh explains. “Investment institutions prefer large funds with a proven track record.”

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

All these factors influenced investment patterns this year. Total capital raised by companies decreased by 12% (from $9.2 billion in 2023 to $8.1 billion in 2024) and the number of deals decreased from 682 to 434, but the average amount per deal decreased by 37% increased.

Unsurprisingly, artificial intelligence continues to gain traction as the market’s main growth engine. According to the report’s figures, the share of AI investments in total transactions increased from 26% in 2023 to 41% in 2024. “Young AI companies raise tens of millions of dollars, mostly in the early stages. They require expensive computer infrastructure,” Horesh says.

How data is collected

The report is based on multiple sources, including research firm PitchBook and Israeli database IVC. Vintage’s analysis covers more than 4,000 investment funds and approximately 33,000 companies. That figure has been updated through September 2024, but the forecast for the final quarter of the year is based on a special model that takes into account the time lag in deal reporting. To enable comparison between different markets, all transactions are converted to US dollars at the average exchange rate for the year.

“The market is maturing,” Horesh said. “The transition from growth at all costs to sustainable growth, along with a peak in M&A deals, demonstrates the robustness and maturity of Israel’s technology industry.”

“Israel continues to lead in the quality of its technology and is exceptional in other areas,” said Guy Lachman, a partner in Pearl Cohen’s High Technology Practice Group, who attended the senior report’s presentation. “We are seeing significant investment opportunities.” “For many European and Asian investors, investing in Israel at the moment is seen as too complex and difficult, and unfortunately many of them have lost interest in us. continues, and new investments have begun.” Valuations have fallen significantly amidst very cautious and cautious behavior on the part of investors, who in most cases have been relatively modest. ”

Published by Globes, Israel Business News – en.globes.co.il – on December 5, 2024.

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