IVC: 2020 was a record year for Israeli tech

ZEV STUB

Money / (photo credit: INGIMAGE / ASAP)

Despite the global crisis, Israeli tech companies raised a record $9.9 billion in 578 deals, according to the 2020 Israeli Tech Review published by IVC and Meitar Law Offices.

Those numbers represent an increase of 27% in volume and a 14% increase in the number of deals compared to 2019. The numbers were bolstered by seven large deals worth more than $200 million each, compared to three such large deals in 2019.

The findings parallel those published in a competing report by PwC Israel earlier in the week.

“While in 2020, primarily due to the COVID-19 pandemic, we saw a significant decline in the M&A activity of Israeli companies, we simultaneously experienced an increase in financing rounds by Israeli and foreign investors, in the number of deals as well as the capital invested,” said the report’s authors. “Specifically, financing among growth companies showed a significant increase, as did the total number of rounds. The above demonstrates the maturity and development of the Israeli high-tech industry, manifested, among other things, in the increased number of companies that have crossed the billion-dollar valuation (unicorns).”

“Besides, in 2020, we saw a significant increase in financing by Israeli tech companies on the capital market, partly due to low-interest rates and the general hesitation in the markets in light of COVID-19. SPAC deals also experienced significant growth in 2020, as in the US, it was a record-breaking year in the number of SPAC offerings and the overall amounts raised in these offerings.”

“According to the pipeline we observe, this trend will continue in 2021, and many of the large companies that have matured in recent years will examine the option of public capital markets for continued growth and development. We believe that it will lead to an increase in M&As in these companies, where traded shares will be used as currency,” the report said.
There were 371 VC-backed deals worth $8.7 billion during the year, compared to $6.52 billion in 320 deals in 2019. Investments in early rounds declined in the first two quarters due to the COVID-19 crisis. However, the numbers picked up in the third and fourth quarters.

Some 121 publicly-traded hi-tech companies raised $6.6 billion during the year, compared to $2 billion by 68 companies in 2019. The most significant trend observed among investors was the focus on existing portfolio companies and increased follow-on investments, the report said.

Mature growth companies raised record amounts in 2020, continuing the trend observed over the past two years. Total investments in growth companies were $8.33 billion. Early-stage companies raised $1.6 billion in 2020.
There was a significant decrease in mergers and acquisitions, as 93 companies netted $7.8 billion, after 143 M&As raised $14.24 billion in 2019. As in 2019, US-based corporations accounted for 90% of all M&As.

There were 18 IPOs by Israeli tech companies on local and foreign capital markets in 2020, with a total offering of $1.6 billion. Israeli public companies’ activity on the capital markets was $6.55 billion (including IPOs, follow-ons and RDs, PIPEs, equity, and debt) in 121 deals compared to $1.95 billion raised in 68 deals in 2019.

“2020, which was and continues to be impacted by COVID-19, is ending on a strong note and with hopes for continued activity in financing and offering and renewed increase in M&As,” the report concluded.