Our thinking

Outlook for M&A in Israel: Execs expect the bull run to continue

What's inside

Our third annual survey finds that a bullish outlook and the ascendance of domestic and Asian buyers could make 2019 a standout year


Israel had a stellar year for M&A in 2018. The country set a new record for value, logging US$26.5 billion over 103 deals. Such strong M&A activity may have come as no surprise to readers of last year's issue of Outlook for M&A in Israel. Indeed, 79 percent of executives we surveyed for last year’s report said that they expected to be involved in more deals in the year ahead than in the previous year.

Can Israel continue its M&A streak in 2019? That would be impressive, given that the country has set new records for value in every year since 2016. Both domestic and international politics are uncertain. And the global economy may be heading for a downturn—indeed, a number of economies are already slowing.

For the third year in a row, we conducted a survey to gain insight into the future of Israel M&A. In the first quarter of 2019, Mergermarket surveyed 51 senior-level executives at Israeli companies and private equity firms on their outlook for M&A. The survey included a combination of qualitative and quantitative questions, and all interviews were conducted over the telephone, by appointment.

Our research suggests that M&A will continue apace or even accelerate in 2019, as Israeli dealmakers enthuse about the current market.

Key takeaways from the study include:

  • Optimism about future dealmaking is stronger than ever
    More than three-quarters of survey respondents (76 percent) expect to complete more M&A transactions over the next 12 months than they did in 2018, with optimism about the level of deal activity remaining about the same as it was last year. Anxieties about the availability of financing have not affected confidence regarding dealmaking.
  • Global economic headwinds do not worry dealmakers
    More than three-quarters of respondents (76 percent) say a global economic slowdown would not make them less likely to engage in M&A. Some 37 percent say a slowdown would actually increase the chances of them doing a deal.
  • Expect domestic acquirers to dominate, Asian investment to rise
    In recent times, international dealmakers have dominated Israel’s M&A market, but respondents expect domestic acquirers to step up activity in the year ahead. More than two-thirds (69 percent) anticipate that Israeli private companies will be most active over the next 12 months. Respondents also anticipate an increase in the number of Asian acquirers as a proportion of the international dealmakers active in the country.


Israel M&A, by the numbers

Selected charts provide an overview of 2018 performance, including M&A value and volume, top deals, leading sectors and top inbound bidders.


Optimism about M&A is stronger than ever

Deals targeting Israeli companies hit an all-time high of US$26.5 billion in 2018, from 103 deals—an increase of 4.5 percent in terms of value compared to 2017. 

Global economic headwinds do not worry dealmakers

Many survey respondents are so confident about the prospects for M&A activity in the next 12 months that they do not view a possible global economic slowdown as an obstacle. 

Expect domestic acquirers to dominate and Asian investment to rise

The shift could be dramatic: In 2019, 69% of respondents predicted that private companies would be among the most active types of acquirers in the coming year, compared to just 23% who said so in 2018.


Four trends set to define 2019 and beyond

Our research suggests that M&A activity involving Israeli companies is set to remain strong during 2019 and beyond, despite potential challenges from slower global growth and both regional and international political volatility.

Israel Bills Hero M&A in Israel

Global economic headwinds do not worry dealmakers

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of respondents predict an increase in funding levels over the next 12 months

Many survey respondents are so confident about the prospects for M&A activity in the next 12 months that they do not view a possible global economic slowdown as an obstacle. More than three-quarters of respondents (76 percent) say a slowdown would not diminish the likelihood of their engaging in M&A. Of that number, almost half (37 percent) say a slowdown would actually increase the chances they would do a deal.

Amid a slowing global M&A market—driven not least by rising political and economic uncertainty—this might be considered complacency rather than confidence. But survey respondents insist their optimism is not misplaced. "The slowdown has been rather gradual," points out the director of M&A and corporate development at one Israeli corporate. "We have made plans to continue our activities while finalizing existing talks with companies."

Again, Israel's technology sector is one factor inspiring confidence. Businesses around the world are scouring the country for assets that might boost their own innovation. US giant Walmart's recent purchase of the artificial intelligence and natural language processing startup Aspectiva is just one example of this phenomenon. While this was the retail business's first startup acquisition in Israel, it has a number of other ventures in the country including investments in technology think tanks and accelerators.

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A safe haven

of respondents say a global economic slowdown would not diminish the likelihood of their engaging in M&A

As for the 37 percent who feel a global slowdown could swell Israel's M&A numbers, the country's recent healthy performance may have persuaded some that it represents a safe haven. While the Israeli economy is not immune to external risks, the country's unemployment statistics (currently at an all-time low), supportive monetary policy and rising wages are underpinning consumer spending and investment.

Meanwhile, growing tensions between the US and a number of regions (including Mexico and China) are unlikely to affect Israel, a key ally in the Middle East. It is notable that so far this year US companies have made five of the top-ten acquisitions in the country.

The CFO of an Israeli corporate says of the global picture: "We've seen how well Israeli companies have coped with difficult situations in the past, so while I think the economic conditions do play a certain role in the growth dynamics, they will not deter us from engaging in M&A in the next 12 months."


Local concerns and global issues

This is not to suggest Israeli M&A faces no headwinds at all. However, survey respondents are just as likely to be concerned that regional instability affecting M&A prospects reflects global economic volatility. The former is closer to home and tougher to insulate against. However, the CFO of one Israeli private equity firm says local issues have been eased by the "establishment of security conditions, leading to a degree of normalization, with only slight disruptions now and again."

Nor do respondents consider themselves completely unaffected by the political problems confronting the global economy. More than half (51 percent) think the rise of protectionism and trade disputes are the most significant threat to M&A activity; by contrast, just 20 percent are more concerned about political instability in Israel itself. With cross-border M&A activity having represented such a significant proportion of deal values and volumes in recent years, this is not surprising.

Nevertheless, confidence is robust. More than two-thirds (69 percent) of respondents point out that Israel's regulatory environment is similar to that of other countries, or easier to navigate, which should encourage both domestic and international bidders.

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