the pwc israel 2012 hi-tech exit report $5.5b israeli hi ... · hi-tech exit report $5.5b israeli...
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The PwC Israel 2012 Hi-Tech Exit Report$5.5B Israeli hi-tech exits in 2012
Rubi Suliman, Partner, High-Tech Leader, PwC Israel
Surprisingly enough, there is still no Hebrew equivalent for the term exit, especially given it's been increasingly used here. Data show that 2012 was a record year for exists of Israeli companies, with $5.5 billion in 50 transactions and an average deal size of $111 million. This, we might add, excludes NDS that was sold to Cisco for $5 billion, because it is not considered an Israeli exit. We also don't count in the Object/Startasys deal, which we don't see as really an exit.
On exits and growing multinational corporationsA heated debate is now raging on the issue of Israeli startup exits vs. building large Israeli corporations. To contribute to this debate, I would like to present a somewhat different perspective. Exits are a blessing for Israel, both in terms of immediate tax collection, but even more so in creating jobs, bringing in more investors, and enriching management and technology experience in Israel, to name just a few benefits.
And, the truth of the matter is that most exiting startups would not have become global tech giants anyway, and some were even formed in the first place with a clear vision of an exit. This narrows down the discussion to those few companies that could potentially evolve into leading multinationals that employ hundreds and thousands of people. For any of those selected companies, market forces should tip the balance between exit and no exit. The bid price, entrepreneurs and investor preferences, the buyer, the business, market conditions, the power of proprietary technology and tax rates are some of the major factors that would direct a company that way or the other. The government can (and should, if that is in its best economic interests) to put on the table the right incentives for investors to go public rather than exit, like providing benefits for such companies. But entrepreneurs and investors have some other powerful considerations in mind.
But beyond that, our take is that, paradoxically, current exits help create future Israeli multinationals. Growing such a multinational is a complex task that requires the right product and technology, an experienced management team and supportive investors. Building a large corporation can bring much more value than a quick exit, but carries much bigger risks.Even though any large, successful company can go for an exit, not every exiting company can become a large, successful company.
One product of exits is investors and entrepreneurs that are more patient, with bigger money and richer multinational experience. The presence of those very essential building blocks of major multinationals makes it easier to take the harder decision not to have a quick exit, but grow. We are already seeing some mature Israeli companies that are now weighing between an IPO and an exit, or some that have advanced even farther and are now looking for the right timing to go public.
The Israeli tech multinationals are growing before our eyes. There is no doubt that most companies will likely choose an exit, but few will grow to become the multinationals that we have wished to see for so long.
Exits onlyIn 2012, the exit market was mainly driven by a high average price per deal. The trend for some years now is clear: less transactions but for higher prices. This trend indicates that the Israeli hi-tech market has now come of age, and that individual local companies get to the exit line when they are much more mature. The last two years volumes tell about the robustness of Israeli hi-tech, which even in a time like this of global of economic uncertainty still attracts buyers and prospects from across the world.
Sliced by segment, the figures really speak for themselves. But note that one or two large deals can skew perceptions about relative strength of
sectors. Notably, the internet sector has gone significantly down from its 2011 exit level, but that doesn't mean it is becoming weaker, and it is very likely to continue to be a powerhouse for Israeli hi-tech growth for years to come. The semiconductors sector is also somewhat slower, but is far from going away, which is another testament for the strength of the industry. IT and enterprise software was ahead of all other sectors thanks to the three large transactions this year.
What the future holds2013 started with much optimism. Two straight years with high exit levels brought here many investors and buyers. Most global hi-tech giants have development centers in Israel, and those also serve as bridgeheads to scout for the next hot Israeli company to buy. Many international private equities slowly join in, as the Israeli hi-tech landscape remained as diversified and innovative as ever. Many of the Israeli companies are quite advanced on the maturity continuum, which can eventually be reflected by exits worth over $1B. The new year is already poised to surpass the ones that came before it. Not only this, a potentially vibrant US market for tech IPOs in 2013 makes it possible that we will see a handful of interesting IPOs of Israeli companies and a continued building up of those long awaited Israeli multinationals.
Happy and successful exit yearRubi Suliman, PartnerHi-Tech leader, PwC Israel
2005 2006 2007 2008 2009 2010 2011 2012
Total Amount ($M) 2740 10000 3522 2681 2572 1176 5078 5565
Number of deals 79 93 88 84 73 23 63 50
Average deal size ($M) 35 108 40 32 35 51 81 111
Total Amount & No. of Deals
Average Deal Size ($M)
35
108
4032 35
51
81
111
0
20
40
60
80
100
120
2005 2006 2007 2008 2009 2010 2011 2012
Average deal size
2,740
10,000
3,522
2,681 2,572
1,176
5,078 5,565
79
93 8884
73
23
63
50
0
10
20
30
40
50
60
70
80
90
100
-
2,000
4,000
6,000
8,000
10,000
12,000
2005 2006 2007 2008 2009 2010 2011 2012
Total Amount ($M)
Number of deals
2011 Vs. 2012 by Sector
$ 1,480
$ 1,046
$ 945
$ 767
$ 488
$ 328
$ 25
$ 554
$ 796
$ 1,486
$ 1,036
$ 1,276
$ 1
$ 10
Internet
Semiconductors
IT & Enterprise Software
Communication
Life Sciences
Miscellaneous Tech.
CleanTech
2011
2012
2005 2006 2007 2008 2009 2010 2011 2012 Total Amount
268 574 537 234 338 302 768 1116
Number of deals
16 20 25 18 14 4 11 10
Average deal size
17 29 21 13 24 75 70 101
Communication
Internet
2005 2006 2007 2008 2009 2010 2011 2012 Total Amount
644 122 444 235 27 162 1480 554
Number of deals
3 3 11 11 12 5 15 10
Average deal size
215 41 40 21 2 32 99 55
2005 2006 2007 2008 2009 2010 2011 2012 Total Amount
0 9 95 87 593 0 25 10
Number of deals
0 5 3 6 3 0 1 1
Average deal size
0 2 32 15 198 0 25 10
268
574
537 234338 302
768 1116
1620
25
18
14
4
11 10
0
5
10
15
20
25
30
0
200
400
600
800
1000
1200
2005 2006 2007 2008 2009 2010 2011 2012
Communication
Transactions amount Number of deals
644 122 444 235 27 162 1480 554
3 3
11 1112
5
15
10
0
2
4
6
8
10
12
14
16
0
200
400
600
800
1000
1200
1400
1600
2005 2006 2007 2008 2009 2010 2011 2012
Transactions amount Number of deals
0 9 95 87
593
0 25 100
5
3
6
3
0
1 1
0
1
2
3
4
5
6
7
0
100
200
300
400
500
600
700
2005 2006 2007 2008 2009 2010 2011 2012
Transactions amount Number of deals
CleanTech
2005 2006 2007 2008 2009 2010 2011 2012 Total Amount
449 6669 1395 1088 416 347 945 1798
Number of deals
23 38 23 26 17 6 22 10
Average deal size
150 43 58 24 42 61 175 20
449 6669 1395 1088 416 347 945 1798
23
38
2326
17
6
22
10
0
5
10
15
20
25
30
35
40
0
1000
2000
3000
4000
5000
6000
7000
8000
2005 2006 2007 2008 2009 2010 2011 2012
Transactions amount Number of deals
IT & Enterprise Software
332 724 220 920 778 18 488 1276
1816
11
11 15
3
6
9
0
5
10
15
20
0
200
400
600
800
1000
1200
1400
2005 2006 2007 2008 2009 2010 2011 2012
Transactions amount Number of deals
2005 2006 2007 2008 2009 2010 2011 2012 Total Amount
332 724 220 920 778 18 488 1276
Number of deals
18 16 11 11 15 3 6 9
Average deal size
18 45 20 84 52 6 81 128
742 1883 672 80 419 341 1046 812
8
5
7
56
3
4
8
0
1
2
3
4
5
6
7
8
9
0
500
1000
1500
2000
2005 2006 2007 2008 2009 2010 2011 2012
Transactions amount Number of deals
2005 2006 2007 2008 2009 2010 2011 2012 Total Amount
742 1883 672 80 419 341 1046 812
Number of deals
8 5 7 5 6 3 4 8
Average deal size
93 377 96 16 70 114 261 102
Life Sciences
Semiconductors
*Total Amount and Average deal size in $M
2012
2011 & 2011 by Deal Size
2011
Deal Size No. of Deals<$10M 12$10M to $50M 18$50M to $100M 4$100M to $500M 14$500M to $1B 1
<$10M24%
$10M to $50M37%
$50M to $100M
8%
$100M to $500M
29%
$500M to $1B2%
<$10M29%
$10M to $50M36%
$50M to $100M
13%
$100M to $500M
19%
$500M to $1B3%
Deal Size No. of Deals <$10M 18 $10M to $50M 23 $50M to $100M 8 $100M to $500M 12 $500M to $1B 2
2005 2006 2007 2008 2009 2010 2011 2012
VC Funding in $M
(MoneyTree) 1,110 1,201 1,197 1,398 735 885 1,227 781
Exits in $M 2,740 10,000 3,522 2,681 2,572 1,176 5,078 5,565
VC- backed funding vs. Exits total amount
1,110 1,201 1,197 1,398 735 885
1,227 781
2,740
10,000
3,522
2,681 2,572 1,176
5,078 5,565
-
2,000
4,000
6,000
8,000
10,000
12,000
20052006200720082009201020112012
MoneyTree
Exits
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For further information
Karin Gattegno, Business Development Manager Hi-Tech department, PwC Israel
*The report refers to both Asset purchase and Share Purchase M&A transactions of Israeli companies or companies that have a significant Israeli links.**Data for 2005-2010 based on IVC database.