Report: Decline in Number of Israeli Hi-Tech Exits in Midst of COVID-19

IVC-Meitar study finds there were only 52 deals in first half of 2020 compared to 77 in 2019; however report also finds increase in average deal value

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By Lidar Gravé-Lazi

The first half of 2020 marked a decline in the number of Israeli tech exits in the wake of the coronavirus pandemic, a new report released Wednesday by IVC and Meitar Law firm found.

According to the report, there were 52 exits with a total value of $5.82 billion in the first half of 2020, compared to 77 exists with a total value of $14.3 billion in the first half of 2019.
This marks the sharpest decline in the last six years, both in the number of deals and their value.

The report found that the number of exits between $100 million and $5 billion was also lower than in the first half of 2019 - only 9 deals in 2020 compared to 23 in 2019.

“Looking at the Exit activity in the first six month of 2020, we see the substantial effect of Covid-19 bringing a significant decline in exits. These results sit well with the general atmosphere among buyers in light of this crisis that the focus should be on protecting market share and revenues and preserving cash, rather than deploying capital on M&A. We anticipate that H2/2020 will continue this downtrend in exits," said Shira Azran, partner at Meitar.

"On the other hand, we see that in many companies the growth processes continued during the Covid-19 crisis as well, and we see specific sectors that are flourishing and were given an unprecedented ground for accelerated growth, such as digital health, fintech and generally digital services. That will hopefully be the basis for exits in future years. In addition, contrary to the exit activity in Israel, investment activity sends an optimistic message," she added.

As such, excluding transactions of $5 billion or more, the findings indicated that the average deal value in the first half of 2020 rose to $112 million - the highest average value in the last six years.

This figure was affected by three transactions of over $1 billion each - the acquisition of Checkmarx by Hellman and Friedman for $1.15 billion, the acquisition of Armis by CapitalG and Insight Partners for $1.1 billion and the acquisition of Moovit by Intel for $1 billion.

Additionally, despite the decline in the number of exits, the report did highlight that the first half of 2020 saw the highest investment value in the last six years. According to the findings, in the first half of 2020 $5.2 billion was raised in 312 investment deals, an average of $16.8 million per investment, compared to $3.76 billion raised in 258 deals in the first half of 2019, averaging $14.5 million per deal.

The report also noted that there were 10 investment deals of over $100 million, again marking the highest number of deals in this market segment in the last six years.

According to Michal Saam, Data Analyst at IVC, "This was a relatively weak half year in terms of IPOs and Buyout deals, with 3 IPOs and a single Buyout deal - of Armis - compared to 8 deals in the first half of 2019."

She added: "On the optimistic side: although the report is concentrated in the first half of 2020, the second half began with two IPOs from PolyPid and Lemonade, with the latter leaving a significant mark for investors and quite unusual for Israeli companies on Wall Street. It is hoped that the issue of Lemonade will mark a new wave of Israeli offerings on Wall Street, and some of them may come to fruition as early as the current half of 2020."