Local M&A Gains Traction in Israeli High-TechJan. 26, 2016
Startup founders and investors in Israel have long bemoaned the limits of local growth opportunities, offering few alternatives for many tech startups apart from getting snapped up by foreign firms.
That may be starting to change: Some of the country’s biggest tech firms are now gobbling up their smaller brethren.
Late Tuesday, shareholders of Israeli-based EZchip Semiconductor Ltd. agreed to a roughly $800-million offer by fellow Israeli chip designer Mellanox Technologies Ltd., marking one of the biggest deals signed in recent years in which both parties were locals.
Such Israeli-only deals came in at $1.18 billion in aggregate last year, topping out 2014’s $1.17 billion, and dwarfing the $476 million annual average over the last 10 years.
That is still a far cry from the $7.2 billion foreigners spent buying Israeli companies in 2015. Microsoft Corp. was the most acquisitive multinational here last year, gobbling up five Israel-based startups, including three cloud-information security firms that together cost Microsoft over $500 million, according to a person familiar with the matter.
Still, the new homegrown deal-making is raising hopes that local companies now have a viable alternative to getting bought by a foreign firm. Amid a yearslong tech boom, some rising Israeli tech stars that have stayed independent are now churning out enough cash flow to seek out acquisitions themselves. The universe of private investors here, too, has grown, enabling companies to tap resources locally to increase their fire power.
Israeli firms “are now more willing to understand that together they can attain critical mass,” says Dan Shamgar, a partner at Meitar Liquornik Geva Leshem Tal, a law firm that advises on some of the recent deal making.
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