All signs point to a healthy M&A market in 2018. There is no shortage of disruptive companies to acquire, and the country’s pro-competition legislative agenda is helping to build a strong deal pipeline for the future.
Based on our survey, market data, and experience in the market, we expect the following trends to define Israeli M&A over the next 12 months:
Tech charges ahead
Israel’s booming start-up landscape will continue to bring a steady stream of assets to the market. Our survey shows that cybersecurity will be a key focus for investors. This is due to both the technological prowess of Israeli firms and the intense global demand for cybersecurity assets in the face of growing security concerns.
The return of China
China was notably absent from the market in 2017, following the tightening of its outbound M&A rules in late 2016. A revision of these rules, which now provide greater clarity, should result in Chinese bidders increasingly returning to the fold in 2018.
US less active
While not unique to Israel, the Trump administration’s corporate tax overhaul could lead to the repatriation of capital and lower overseas investment. As the biggest investor in Israel in 2017, any pullback from US companies could be felt keenly.
Given the domestic market’s growth limitations, Israeli companies are likely to increasingly pursue outbound M&A in order not only to acquire revenues in the first instance, but also to access greater long-term economic growth.
The December 2019 deadline for compliance with the Anti-Concentration Law has implications for M&A activity in 2018, and will be keenly watched by dealmakers. It has been reported in the press that several large sponsors have been preparing for the sale processes of the two largest credit cards in Israel, which are due to begin imminently.