IVC-MEITAR HIGH-TECH EXITS 215 REPORT 215 exits peak at $9.2B 3 rd strongest year in 1 years
Israeli High-Tech Exit Highlights $9.2B exit proceeds in 215 up 16% from 214 215 average exit rises to $87 million 43% above 1-year average VC-backed exits reach an outstanding $4.98B highest in 1 years Software topped all exits with $3.88B, due to $1.2B Fundtech exit $69 million raised in 215 IPOs down from 214 with an exceptional $2.1B M&A deals below $1B peak in 215, reaching $7.16 billion M&A deal averages on the rise due to a change in the deal-size mix 3% of deals involve Israeli high-tech companies on both the acquiring and acquired side 2
Israeli High-Tech Exits 26-215 Israeli high-tech exits totaled $9.2 billion in 215, 16% up from 214 exit proceeds, placing it third in the past 1 years. The amount was a mere 7% below 212 s $9.75 billion, which included the NDS $5B acquisition, and 16% less than the $1.75 million in exit proceeds recorded in 26, which included two major deals totaling $6B (M-Systems & Mercury acquisitions). A hundred and four exits were made in 215, 1% below the 214 figures, but in line with the average 1 deals per year. $B # 14 1 116 118 116 12 17 14 8 97 1 91 87 84 81 8 6 1.75 9.75 6 9.2 4 7.78 6.71 4 5.38 4.42 2 2 2.7 2.65 2.63 26 27 28 29 21 211 212 213 214 215 Exit Amount $B # of Exits 3
Israeli High-Tech Exits* in 26 215 deals below $1B Since deals above $1 billion largely skew data for the top years, somewhat obscuring the actual trend, we recalculated the data for all deals below this amount. In general, there have been 6 deals of more than $1B each in the past 1 years, including the three mentioned earlier, as well as the Waze acquisition in 213, the Mobileye IPO in 214 and the Fundtech acquisition in 215. Without these deals, the chart clearly shows 215 to be the strongest exits year yet, both in terms of the total proceeds and the average amount per deal - $75M, as compared with a 1- year average of $48M. $B # 8 14 118 7 114 115 12 17 13 6 96 87 9 1 81 84 5 8 4 6 3 4 2 1 2 4.69 4.42 2.7 2.65 2.63 5.38 4.75 5.52 6.75 7.77 26 27 28 29 21 211 212 213 214 215 Exit Amount $B # of Exits *Without deals above $1B 4
Israeli High-Tech Exits Proceeds by Deal Size Range* 215 vs. 214 Since there were somewhat less deals in 215 as compared with 214, the reason for the continued growth is the deal size. Looking at the top end of exits - at deals above $5 million - in 215 as compared with 214, we found that while the number of deals above $5 million has not changed, there was a marked increase in the number of deals within the $5 million to $1 million range as well as in the $1 million to $5 million range. The proceeds from the two groups therefore expanded from a total of $4.17B in 214 to $5.44B in 215, an increase of more than 3%. In total, the three groups made up nearly 5% of the deals in 215, and over 76% of the proceeds. Deals between $5m and $1B* Total $m Total # of Deals 8, 7, 6, 5, 4, 3, 2, 1, - 45 4 35 3 25 2 15 1 5 1,592 3,167 1,429 4,161 1,5 1,281 214 215 2 18 13 214 215 $5m-$1m $1m-$5m $5m-$1m 2 21 18 5
Top Ten Exits in 215 $1.2 b All top exit deals for 215 exceeded $2 million in proceeds* - an unprecedented cluster of top ten deals. The $1.25 billion acquisition of Fundtech by D+H, a global fintech company, accounted for almost 14% of the total exit proceeds in 215. Placed second is the acquisition of Valtech by HeartWare. Since the bulk of the deal was a share swap and some of it is conditioned upon meeting certain milestones, the amount is expected to reach $929 million by the time the milestones have been met. So far, Valtech shareholders received nearly $4 million in HeartWare shares. Software companies make up 5% of the top ten deals, with a total of over $2.5 billion *Estimated/Expected amount $929* m $5 m $45 m $36 m $32 m $27 2m $25 *m $23 m $22 5m Semiconductors Communications Software Internet Life Sciences
Israeli High-Tech Exits by Sector 26-215 (%) Thanks to the five deals exceeding $2 million each, software was the most prominent sector in 215 in terms of exit proceeds with 43% of the total amount. Twenty-nine software deals in total garnered $3.9 billion - the second highest for the sector in the past 1 years. The Fundtech deal accounted for 32% of the total exits for the sector, and the top five deals accounted for 65% of software exit proceeds. Life science exits came in second, with 16% due to the Valtech deal, closely followed by Internet deals with 15% and communications with 12%. Over the past 1 years, the ICT sectors maintained their top positions, changing places mainly among themselves, with 29 and 212 being the only exceptions, when life science exit proceeds overtook all other sectors. 215 214 213 1% 212 1% 211 1% 21 29 28 27 26 3% 3% 3% 6% 6% 11% 12% 17% 1% 6% 24% 19% 4% 32% 29% 15% 13% 33% 62% 11% 2% 21% 5% 41% 1% 16% 62% 2% 26% 43% 14% 23% 26% 2% 11% 31% 15% 2% 12% 7% 9% 35% 37% 8% 16% 5% 1% 1% 5% 9% 23% 6% 18% 6% 17% 16% 18% 18% 2% 5% 5% 5% 2% 3% % 1% 2% 3% 4% 5% 6% 7% 8% 9% 1% Cleantech Communications Internet IT & Enterprise Software Life Sciences Miscellaneous Technologies Semiconductors 7
VC-Backed High-Tech Exits in 26-215 215 proved to be an exceptional year for VC-backed exit deals. Fifty-two VC-backed exits totaled $4.98 billion, the highest amount in the past 1 years, bypassing even 213 s $4.4 billion, which included the Waze acquisition. VC-backed exits accounted for 55% of the total exit proceeds in 215. This was a noticeable increase, compared with 214 s 4% in VC-backed deals out of the total exit amount and somewhat below 213 s record of 6%. Half of the deals completed in 215 were VC-backed, the highest share for such deals in the past decade, well above 214 s 37% or 213 s 39% of the total number of exits. $B 1. 8. 6. 4. 2. - 2.95 2.87 3.7 4.98 4.4 7.8 2.62 2.31 6.88 4.7 1.59 1.59 1.46 4.4 2.11 2.76 2.68 1.11 1.6 1.16 26 27 28 29 21 211 212 213 214 215 Non-VC-Backed Exits $B VC-Backed Exits $B 8
IPO HIGHLIGHTS IPO proceeds in 215 - $69M - just 3% above the 1-year average
Israeli High-Tech IPOs 26-215 Eight Israeli high-tech IPOs accounted for $69 million, or a mere 7% of the total proceeds, in 215, as compared with 214 s outstanding 27%. IPOs in 215 yielded a little more than the $591 million 1- year average of proceeds, while the number of deals was somewhat below the 1 IPOs average of the past decade. The number of deals was lower than expected, as many companies shelved their IPO plans after the worldwide IPO markets in general, and NASDAQ in particular, no longer seemed to offer favorable conditions for initial public offerings. Five out of the companies that did end up choosing the IPO route in 215 were VC-backed. $M # 25 27 21 2 2 15 17 1 9 687 693 8 8 69 5 5 361 1 127 126 22 26 27 28 29 21 211 212 213 214 215 IPO Total $M # of IPOs 3 25 2 15 1 5 1
Israeli High-Tech IPOs by Stock Exchange ($m) - 215 Unlike earlier in the decade, when TASE constituted a valid IPO alternative for companies particularly in the life science sector - all 215 IPOs were performed outside Israel, with the majority in NASDAQ, similarly to the year before, 6 of 8 deals in 215, as compared with 12 of 17 in 214. The largest IPO was by Novocure, which raised $165 million based on a $1.84 billion valuation, followed by SolarEdge with $165 million raised at a $685 million valuation both on NASDAQ. 48 Life science companies comprised half of the deals and 55% of the IPO proceeds in 215. The total valuations of the companies at the time of their IPOs was $3.54 billion, and stands at $3.8 billion market cap as of the beginning of 216, mostly due to SolarEdge adding nearly 68% percent in market cap since it s IPO in March. AIM NASDAQ 561 11
HIGH-TECH MERGERS & ACQUISITIONS 215 M&A performance of $8.41B 3 rd highest in a decade
Israeli High-Tech M&As 26-215 Since M&As are traditionally the more prominent form of exit for Israeli technology startups (at an average ratio of about 1 to 1 in favor of M&As), the chart and trend depicting M&As over the past decade closely reflects the data and trends for all exits (see pg. 3). Here as well, 215 is third, following 26 and 212, with $8.4 billion in 96 deals (top chart*), but takes the lead with $7.16 billion, and is a definite leader in terms of average M&A deal size, after deals above $1 billion are excluded (bottom chart**). B$ 1 8 6 4 2 8 7 6 5 4 3 2 1 12 12 96 99 91 87 91 89 96 1 8 75 8 6 1.6 9.75 8.41 4 6.35 5.26 5.67 3.73 2 2.7 2.63 2.5 26 27 28 29 21 211 212 213 214 215 With deals above $1B* # 12 12 94 88 99 91 95 87 9 1 8 75 8 6 4 2 4.1 3.73 2.7 2.63 2.5 5.26 4.75 5.16 5.67 7.16 26 27 28 29 21 211 212 213 214 215 M&A Total $B # of M&A Deals Without deals above $1B** 13
Average Israeli M&A Deals* 26 215 ($m) The overall average M&A deal reached $88 million in 215. Excluding deals above $1 billion, the average drops to $75.4 million per deal, revealing a clear increase in deal size in 215, with a 29% increase from the previous record holder 213 with $58.6 million*, and 58% above the 1-year average of $47.6 million*. The average deal size climbed markedly since the beginning of 211, and the past four years averaged $59 million*. Throughout the past 1 years, the average VC-backed M&A was significantly larger than the average M&A deal, by about 34%, dropping to an average difference of 29% since 211. This demonstrates that the change in an average deal size is true for the entire industry, rather than only for VC-backed companies. The average VC-backed M&A peaked in 215 at a whopping $95.8 million*, 51% above the 1-year average of $63.4 million*, and 24% above 213 s $77 million*. Despite a minor decline in 214, as compared with 213, the average VC-backed M&A has been growing since 28 at an average rate of 14%. If the trend is to continue into 216, we may see the average VC-backed M&A deal surpass the $1 million mark by the end of the year. 1 9 8 7 6 5 4 3 2 1 55. 59.5 42.6 41. 39.8 31. 49. 48.9 32.9 33.3 65.9 7.1 51.5 52.8 77. 72.8 58.6 57.3 26 27 28 29 21 211 212 213 214 215 *Without deals above $1B Average M&A Deal ($M) Average VC-Backed M&A Deals ($M) 14 95.8 75.4
M&A Deals: Deal Size Mix (# of deals vs. $m) The reasons for the up-trend in the average M&A size is easily explained by breaking the deals into size ranges. The analysis shows a clear upward shift of the deal size along the range in all groups. 215 has seen M&A deals above $5 million increase both in numbers and total proceeds, at the expense of smaller deals. The number of deals below $1M dropped from the previous average - 53% of the deals - to less than a third of all deals in 215 (32%). Deals ranging between $1M and $5M dropped in number as compared with 214, but brought 12% more in proceeds, implying that the deals in this group were on the higher end of the range, compared to 214. In the top three groups in 215, both the number of deals and the proceeds topped the 214 figures. # 1 8 6 4 2 $m 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, - 1 2 3 16 3 3 13 12 3 16 7 5 1 18 11 9 9 8 5 1 5 1 7 5 18 1 31 17 19 23 26 18 31 25 21 27 53 47 46 51 49 54 45 45 37 31 26 27 28 29 21 211 212 213 214 215 2,679 6,851 6,434 517 2,816 1,592 3,734 3,54 2,481 2,92 2,134 1,399 1,254 2,475 2,571 2,51 1,2 562 638 66 74 387 383 59 574 41 458 751 342 331 425 44 56 644 722 26 27 28 29 21 211 212 213 214 215 <$1m $1m-$5m $5m-$1m $1m-$5m >=$5m 15
Total number of M&A deals vs. deal amounts by deal size (26-215) M&A deals in 215 also followed closely what we call the deal size hump paradox of Israeli high-tech exits, where the bulk of the dollar proceeds is generated by deals in the $1M to $5M range, more than the capital generated in deals above $5M and $1B combined. The chart on the right shows that this trend holds true for all deals in the past 1 years, reflecting an additional observation for 215 deals above $1B tend to generate more dollar proceeds than deals between $5M and $1B, although there are usually more deals in the latter group. Lastly, while small deals below $5M tend to make up the majority of deals (up to 77%), they generate less than 12% of proceeds, fixing $5M dollar deals at the equator where the trends flip. It may be interesting to observe how this model changes, if and when the average M&A continues to climb. 3, 25, 2, 15, 1, 5, - 43 542 542 Deals ranging $1m- $5m accounted for 43% of total dollar volume $m # 79 114 1,515 135 4,13 5,774 81 25,912 128 8,19 13,54 11 5 5 < 5-1 1-2 2-5 5-1 1-5 5-1 1> M&As Total $M *Without deals above $1B # of M&As 16 5 45 4 35 3 25 2 15 1 5
M&As THE ACQUIRER SIDE Israeli high-tech companies continue playing a role on the spending side of the M&A equation
215 High-Tech M&As: Acquirers by Country of Origin An analysis of acquiring companies the companies on the other side of the exit deal by geography - revealed that, as expected, North American companies are the largest prospects for Israeli M&As with 43 acquirers in 47 deals from the US, and 3 deals for two Canadian acquirers accounting for 53% of the deals, up from a 44% share in 214. 6% 3% 4% 2% Israeli companies were second in line as acquirers, with 3% of the deals involving Israeli companies on both sides of the deal. The number reflects a slight decline compared to 214 s 34%. 3% 53% Companies from the UK and Europe placed third with a total of 1% of the deals, while Asian investors placed fourth at 5% (including East Asian and Indian acquirers). United States & Canada Israel United Kingdom East Asia Mainland Europe & Russia India Brazil Australia & New Zealand 18
Acquisition Made by Israeli High-Tech Companies 26-215 Analyzing all acquisitions made by Israeli high-tech companies, we revealed that the number of local tech companies to choose M&As as a form of expansion has remained steady in the past two years at 48 companies, though the number of deals initiated by Israeli high-tech companies in 215 was up nearly 11%, to 72 deals, the second highest in a decade. The volume of deals has sky-rocketed from $3.2 billion in 214 to $48.2 billion in 215, a direct result of Teva Pharmaceuticals aggressive expansion strategy over the past year, with five acquisitions of foreign companies, that cumulatively accounted for 95% of Israeli acquisitions this year. Teva wasn t the only company to pursue global expansion plans. Frutarom, a worldwide leader in the food ingredients and extracts market, was another dynamic player closing 12 deals nearly 17% of the number of deals made by Israeli acquirers in 215 though spending a fraction of Teva s M&A expenditures, at nearly $33 million. Ten other Israeli hightech companies made two acquisitions in 215, further demonstrating that Israeli companies are indeed seeking growth and expansion. Perhaps, more interestingly, in the past two years these expansion efforts are very clearly focused on local companies: more than $1 billion were spent by Israeli high-tech companies on M&As in Israel in either of the past two years (bottom chart). 9 8 7 6 5 4 3 2 1 14 12 1 8 6 4 2 56 52 48 48 36 39 41 37 28 36 41 79 68 53 53 61 35 47 65 72 26 27 28 29 21 211 212 213 214 215 # of Acquisitions made # of Israeli High-Tech Acquirers 1,165 1,18 84 445 163 326 254 55 199 132 26 27 28 29 21 211 212 213 214 215 $M spent in two-side Israeli high-tech M&As 19
THE NON-EXIT ALTERNATIVES FOR LIQUIDATION Technology buyouts are an alternative exit rout for investors while an option for the company to remain independent
Exits vs. Technology Buyouts liquidation without exit Who Exits? When discussing exits in this report, we use the term in accordance with the globally accepted terminology that reflects a company s exit strategy as indicating either an initial public offering (IPO) or a merger/acquisition deal. These types of deals provide liquidation not just for the company s shareholders, but for entrepreneurs, employees and the company itself. In some of these cases, the company itself ceases to exist as an independent entity, such as after an acquisition, where the company becomes a division of the acquiring corporation, or a merger, where an entirely new company emerges from the two (or more) merging entities. IPOs allow shareholders liquidation, but turn a private company into a public one. Some management teams and boards find this route unsuitable for their needs, opting for another form of shareholder liquidation that allows the company to remain an active, independent, private company. Technology buyouts aren t exactly M&As While they are sometimes referred to as acquisitions, purely speaking, buyouts performed by private equity investors are not exits. Although some or all of the previous investors of the company are able to liquidate and possibly profit from the sale, management and the entrepreneurs are able to keep the company running independently, with a new board of directors in place, allowing the company a chance to grow with possibly less shareholder pressure. In some cases, buyouts are a way for a public company to go back to the relative anonymity of a private company without having to go through an unnecessary reputationdamaging delisting. For some companies, it is not about problematic trade volumes or generating market interest they get plenty of those but it is about the freedom of management to go about navigating the ship without having to deal with the various implications of being a public company, as they keep growing their business. Buyouts are a win-win-win situation, when a company is acquired but remains active and continues to grow: the current shareholders get some return on their equity while not having to wait too long for liquidation, while the new investor gets a chance to take the company to the next level. 21
215 High-Tech Buyouts 215 has seen seven technology buyouts, where Israeli or Israelrelated companies were acquired by private equity investors, for a total of $1.1 billion, dominated by two deals, where public companies were bought out by private equity funds. Lumenis was bought out for $51 million by Chinese fund, XIO. ClickSoftware has been bought out by the European branch of Francisco Partners for $438 million. 215 lagged behind 214 s $1.74 billion in 11 deals, lead by a $9 million buyout of Answers Corp., formerly an Israeli company, by Apax Global, and Nordic Capital s buyout of Vizrt yet another ex-public company that became private as a result of the deal. $51 m $43 8m $59 m $5 m $21 m $1 m $6.3 m Miscellaneous Cleantech Software Internet Life Sciences
About this report: This report contains information derived from the IVC-Online Database The report summarizes exits of Israeli and Israel-related high-tech companies in merger & acquisition deals and initial public offerings in 26-215 VC-Backed Deals referred to in this report, represent exit deals where at least one venture capital fund was involved as a pre-exit investor. The report references M&A deals where Israeli high-tech companies acted as the acquiring party. The last section of the report refers to buyouts performed by private equity and financial investors in Israeli and Israel-related high-tech companies. Complete information on M&As and public offerings will be published in IVC High-Tech Yearbook 216 due April 216. All Rights Reserved. Copyright of IVC Research Center Ltd. 216 23
About Meitar Liquornik Geva Leshem Tal: Meitar Liquornik Geva Leshem Tal is Israel s leading international law firm and an undisputed leader in the technology sector. The firm's Technology Group numbers over 1 seasoned professionals who specialize in representing technology companies, cooperating with attorneys from complementary practice areas, such as taxation, intellectual property and labor law, and dozens of attorneys from other practice areas. Meitar has played a significant role in the majority of the largest and most prominent transactions recorded in the Israeli technology sector, including mergers and acquisitions and public offerings on foreign stock exchanges. Meitar is uniquely qualified in the entire corporate life cycle. Meitar advises clients from their initial establishment through raising seed capital to successful exit. Alongside emerging companies, Meitar represents high growth companies, and has represented the majority of the Israeli technology companies that have carried out initial public offerings in the US, as well as a diverse range of multinational companies from the US, China and Europe. The firm represents most of the major venture capital funds active in the Israeli technology sector, and played an active role in formation of some of the most successful and well-known funds in the industry. Meitar is unique among Israel s largest law firms in the number of partners who have worked for major international law firms in the US and elsewhere. The firm maintains close working relationships with leading firms from around the world to provide our international and Israeli clients with the highest level of service and quality in line with the finest law firms from across the globe. 24
About IVC Research Center IVC Research Center is the leading online provider of data and analyses on Israel s high-tech, venture capital and private equity industries. IVC owns and operates the IVC-Online Database which showcases over 14, Israeli technology startups, and includes information on private companies, investors, venture capital and private equity funds, angel groups, incubators, accelerators, investment firms, professional service providers, investments, financings, exits, acquisitions, founders, key executives and R&D centers. Among IVC products and publications are: IVC-KPMG Quarterly Survey, which for over 15 years has been analyzing capital raising trends by Israeli high-tech companies, and the most comprehensive guide to Israeli high technology and venture capital The IVC High-Tech Yearbook the Israel High-Tech, Venture Capital, Startup and Private Equity Directory; surveys; research papers and reports; and interactive dashboards. IVC Industry Analytics analysis, research and insights into the status, main trends and opportunities related to exits, investments, investors, sectors and stages IVC products and services are used regularly by high-tech companies, venture capital funds, private investors, financial investors and institutions, as well as public entities such as the Central Bureau of Statistics, the Bank of Israel and the Office of the Chief Scientist at the Economy Ministry. IVC s information is used by key decision-makers, strategic and financial investors, government agencies and academic and research institutions in and outside of Israel. 25
CONTACT US Marianna Shapira, Research Manager, IVC Research Center +972-()73-212-2339 www.ivc-online.com