- 43 percent of respondents believe overseas PE firms will be some of the most active participants in the M&A market
- 33 percent expect foreign public companies to become more active
- China withdrew from Israel's M&A scene in 2017, accounting for just one of the year's top-20 deals
- But 51 percent of respondents expect Asia to provide the biggest annual increase to the number of foreign investors in the coming year
One of the most striking observations from this year's survey is the shift in expectations about which types of companies will drive M&A activity in the next year. In general, it is predicted that foreign buyers will be more active than domestic acquirers.
Specifically, 43 percent of respondents believe overseas PE firms will be some of the most active participants in the M&A market, a year-on-year increase of nine percent. Thirty-three percent of respondents say that foreign public companies will be the most active, a nine percent increase compared to last year.
Fewer see domestic PE firms as being the most active in the coming year—36 percent, down from 46 percent in our previous report. And the same goes for domestic/Israeli private companies, with only 23 percent saying domestic/Israeli private companies will be most active in M&A, down from 36 percent last year.
These views are consistent with market data, which shows a notable increase in inbound Israeli M&A activity in 2017. Domestic activity has been relatively flat for the past six years.
China set to re-enter the market
China's role in Israel M&A dropped considerably in 2017. In 2016, China had four of the top ten largest deals in Israel. But there was only one Chinese transaction in the top 20 deals in 2017: the US$112 million acquisition of a 65 percent stake in Servotronix Motion Control by Chinese appliances giant Midea Group.
This is likely due to changes in regulations in China. At the end of 2016, China tightened its rules pertaining to outbound investments in order to control currency movements and curb investments that the government deemed overly speculative.
However, in December 2017, regulators made a number of improvements to promote the continuous development of overseas investments by simplifying and clarifying certain procedural requirements. These changes, which came into effect in March 2018, should allow Chinese M&A activity to increase in Israel in the future.
Indeed, 51 percent of survey respondents expect Asia to provide the biggest annual increase in the number of foreign investors in the coming year. Moreover, 85 percent of respondents expect the number of Asian bidders targeting Israeli companies to increase over the next 12 months compared with the previous 12 months; 35 percent expect a significant increase.