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IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd. IVC-MEITAR HIGH-TECH EXITS 2014 REPORT

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Page 1: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

IVC-MEITAR HIGH-TECH EXITS 2014 REPORT

Page 2: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

Israeli High-Tech Exit Highlights

• 2014 exits reach $6.94B

• 2014 IPO deals amount to $2.1B – highest in 10 years

• 2014 M&As at $4.84B with interesting trends in deal sizes and

averages

• Software exits lead, with semiconductors and communications tying for

second

• Average Time to Exit in 2014 at 12 years

• 2014 M&A return on equity ratio exceptionally high at 6.2

• Israeli high-tech companies play an increasing role on the spending

side of M&A equation

Page 3: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

High-Tech Exits 2005-2014

Israeli high-tech exits in

2014 reached $6.94

billion, up 5% from 2013’s

$6.59 billion and 29%

above the $5.4 billion 10-

year average.

Excluding exits above $1

billion, 2014 was the best

year for Israeli exits in a

decade, with 98 deals

accounting for $5.91

billion. On this basis. 2013

is considered the second

best year as 89 deals

attracted $5.39 billion.

3.63

10.75

4.33

2.70 2.61 2.50

5.33

9.74

6.59 6.94

96

116

117

87

81 83

104

88

90

99

0

20

40

60

80

100

120

140

-

2.00

4.00

6.00

8.00

10.00

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Exit Amount $B # of Exits

$ #

Page 4: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

In 2014 VC-backed exits

reached $3.1 billion, a

23% decline from 2013

(the strongest year for VC-

backed deals in a decade),

yet 31% above the 10-year

average of $2.3B.

VC-backed exits

accounted for 45% of total

dollar proceeds in 2014,

down from 61% in 2013.

However, the number of

VC-backed - 42 deal at

42% of total - surpassed

the 35 VC-backed exits

(39%) of 2013.

VC-Backed High-Tech Exits 2005-2014

3,626

10,749

4,332

2,701 2,612 2,503

5,332

9,736

6,588 6,938

2.43

7.80

2.02 1.15 1.03 1.11

2.71

6.88

2.55

3.82

1.20

2.95

2.32

1.55 1.59 1.40

2.62

2.86

4.03

3.12

-

2.00

4.00

6.00

8.00

10.00

12.00

-

2,000

4,000

6,000

8,000

10,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

$m

Non-VC-Backed Exits $b VC-Backed Exits $b

Page 5: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

Israeli High-Tech Exits by Sector 2005-2014 (%)

Software exits led all sectors

in 2014 with 29 deals and

28.3% of capital. It was the

best year for the sector since

2006.

Communications, having

been dominant for the two

prior years, ranked second

with 20.5% of total capital

proceeds. The amount was

down 32% from 2013 levels

and 62% from 2012.

Semiconductors nearly tied,

with 20.4% of the total with

only three deals, mainly due

to the MobilEye IPO.

The Internet sector garnered

13%, twice its 2013 share,

while life science deals

skidded to 10.1% from an

exceptionally high 34.4% in

the previous year.

17.1%

6.2%

11.2%

6.3%

29.7%

9.6%

13.3%

24.9%

10.8%

62.0%

31.7%

20.5%

17.8%

5.7%

10.3%

4.5%

1.7%

11.3%

33.8%

2.1%

4.8%

13.0%

24.6%

62.4%

21.7%

40.8%

15.8%

23.4%

13.3%

15.5%

20.6%

28.3%

12.1%

7.8%

12.3%

37.0%

30.9%

21.4%

10.8%

8.6%

34.4%

10.1%

8.8%

4.9%

5.0%

7.5%

6.5%

24.5%

17.5%

18.3%

3%

16.2%

17.9%

23.3%

4.7%

5.6%

20.4%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Cleantech Communications Internet IT & Enterprise Software Life Sciences Miscellaneous Technologies Semiconductors

Page 6: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

Top Ten Exits in 2014

Mobileye’s IPO was not

only the first IPO to make

the Top Ten exit list since

2006, but was also the

largest ever Israeli IPO on

the New York Stock

Exchange.

The top five deals

contributed 44% of total

capital proceeds among

high-tech exits.

The MobilEye and Wilocity

exits were responsible for

the exceptional results in

the semiconductor sector,

while the Viber and Check

acquisitions accounted for

89% of communications

proceeds, supporting an

otherwise relatively weak

year for the compared to

2013 activity levels.

Semiconductors Communications Software Cleantech Life Sciences

$390m

$900m

$1.02b

$156m

$360m

$350m

$230m

$200m

$250m

$175m

Page 7: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

Israeli High-Tech Exits Proceeds by Deal Range* 2014 vs. 2013

Looking at the top end of

exits, with deals above

$50 million, it seems IPOs

gave a strong boost to

2014 exits (up 156%) in

the $50 million to $100

million range. Ten of the

13 IPOs fell within this

range and accounted for

58% of its proceeds.

In Eighteen exits totaling

$3.16 billion in proceeds

were made within the $100

million to $500 million

range – a 50% incline

compared to just 12 exits

in this segment, valued at

$2.7 billion in 2013.

392 1,005

2,698

3,157

1,620

900

-

1,000

2,000

3,000

4,000

5,000

6,000

2013 2014

6

13

12

18

2

1

0

5

10

15

20

25

30

35

2013 2014

$50m-$100m $100m-$500m $500m-$1000m

Total $m

T

otal # of Deals

*Deals above $50m

Page 8: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

AVERAGE TIME TO EXIT The “10-Year Rule”

Page 9: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

Israeli High-Tech Average Time to Exit (TTE) by Sector 2005-2014*

Among exits above $50

million, companies in four

sectors – communications,

software, Internet and

semiconductors – reached

their exit in an average of

10 years.

Cleantech and other

technologies take

considerably longer to

reach exit (>15 years) and

need relatively large

investments. As a result,

very few large exits are

reached in these sectors.

Life science exits typically

fluctuate between 10 and

16 years.

Sectors most appealing to investors

consistently maintain average TTE

levels near or below the 10-Year

mark.

0

10

20

30

40

50

60

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Cleantech Communications Internet

IT & Enterprise Software Life Sciences Miscellaneous Technologies

Semiconductors Annual Average

*Deals above $50m TTE – Time to Exit in years

Page 10: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

Time to Exit vs. the Venture Capital Model – Why TTE Matters

Time to Exit: The impact on

VC investments

Time to Exit (TTE) is the time it take for a startup to

reach exit – or the time span from establishment to

exit – calculated in years.

Due to the VC model – see on the right – it is clear

why sectors most appealing to VC investors are the

ones to consistently maintain average TTE levels

near or below the 10-year mark.

Interestingly, VC involvement in life sciences, with

its average TTE of 14 years, grew between 2011

and 2014, mostly due to life science dedicated

funds, which operate on an adjusted investment

model.

With cleantech and other technologies some exits

took well over 15 years to reach, which could

explain while these sectors attract relatively little VC

capital. It is yet to be determined if VC funds can

find an appropriate model for investment in these

sectors, in light of the considerable returns (see

discussion in the ROE section of this report).

The Venture Capital Model

The venture capital model of investment is based

on a 10- year lifespan for a typical VC fund, from

first capital call (vintage year) to dissolvent. In some

cases, the lifespan is expanded to 12 years. Within

its lifespan, a VC fund expects to materialize

enough of its portfolio in exits, to allow for the full

capital to be returned to investors, along with

considerable earnings.

Since funds operate with a 10 to 12 years window

of opportunity, they typically prefer to focus on

companies they believe can realize the investment

within that time frame.

Looking again at the picture suggested above, it is

therefore not surprising most VC funds investing in

Israel are focused on the sectors the suggest the

highest odds within the VC model – namely,

software, communications, semiconductors and

Internet.

Page 11: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

Israeli High-Tech Average Time to Exit by Sector 2005-2014*

In 2011-2014, the largest

exits were by companies

operating from 10 to 15

years, a clear shift from

2004-2007 when major exits

were by companies with a

lifespan of 5 to 10 years.

In 2014, average time to exit

the four ICT sectors

increased by 30%. In

contrast, TTE averages

decreased for life sciences

and other technology

companies, bringing their

averages to within the 10-

year mark.

*Deals above $50m TTE – Time to Exit in years

Cleantech

Communications

IT & Enterprise Software

Internet

Life Sciences

Miscellaneous Software

Semiconductors

Color: Sector Size: Average Exit $m

$500m

$200m

$5m

Avg. TTE

30

25

20

15

10

5

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Page 12: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

IPO HIGHLIGHTS

2014 IPO deals amount to $2.1B – highest in 10 years

Page 13: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

Israeli High-Tech IPOs 2005-2014

Substantial growth in both

the number and value of

IPO exits took place in

2014. Seventeen IPOs

accounted for $2.1 billion,

compared to eight IPOs

that totaled only $0.36

billion in 2013.

Capital proceeds

exceeded the 2005-2007

average of $745 million,

mostly due to the

MobilEye offering.

There are currently 25

Israeli companies planning

to go public in the 2015-

2016 period. Over half of

these, are considering

NASDAQ their target

public market.

873

688 674

22

128 126

361

2,100

20 20

26

1

10

5

8

17

0

5

10

15

20

25

30

0

500

1000

1500

2000

2500

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

IPO Total $M # of IPOs

$M #

Page 14: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

321

70

688

1,022

Israeli High-Tech IPOs by Stock Exchange ($m*) - 2014

MobilEye, the largest IPO

of 2014 raised slightly over

$1 billion and is now

trading on NYSE.

Each of the remaining 16

IPOs was under $150

million each, including the

second largest -

SafeCharge’s $126 million

IPO on London’s AIM in

2014.

NASDAQ was the

preferred stock market for

Israeli high-tech

companies in 2014, as 11

NASDAQ-bound first

offerings accounted for

33% of IPO proceeds.

*Please note: while only 10 of 17 IPOs are noted in this slide with a logo,

numbers represent all 17 deals

Page 15: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

HIGH-TECH MERGERS &

ACQUISITIONS

2014 M&As at $4.84B with interesting trends in deal

sizes and averages

Page 16: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

Israeli High-Tech M&As 2005-2014

While the number of high-

tech M&As has remained

relatively steady, with an

average of 85 deals a year,

total dollar proceeds have

fluctuated widely.

The changes mainly reflect

variances in deal size,

namely the few outliers

above $1 billion, including

the Mercury and M-Systems

acquisitions in 2006, the

NDS acquisition in 2012, and

the Waze acquisition in 2013.

Following is our analysis as

to the impact of deal size on

total capital proceeds, and

the changes in the mix over

the past few years.

2.75 10.06 3.66 2.70 2.59 2.37 5.21 9.74 6.23 4.84

76

96

91 87

80

73

99 88

82 82

0

20

40

60

80

100

120

0.00

2.00

4.00

6.00

8.00

10.00

12.00

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

M&A Total $B # of M&A Deals

$M #

Page 17: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

Total number of M&A deals vs. deal amounts by deal size

(2005-2014)

M&A deals in the $100 million to

$500 million range accounted

for $22 billion or 44 percent of

M&A proceeds over the past

decade. Four deals in the over

$1 billion category were alone

responsible for $12.3 billion or

almost 25 percent of the total.

4 M&A deals exceeded the $1

billion mark and gained a total

of $12.3 billion dollars – nearly

25% of all M&A proceeds in the

past 10 years.

While deals below $5 million

accounted for less than 1

percent of the proceeds, they

constituted the largest number

of M&As – 395 (46 percent of

854 deals).

Deals ranging $100m-

$500m accounted for 44%

of total dollar volume

492 470 1,344 3,266

4,253

22,168

5,898

12,254

395

68

102 107

60

110

8 4

0

50

100

150

200

250

300

350

400

450

-

5,000

10,000

15,000

20,000

25,000

<5 5-10 10-20 20-50 50-100 100-500 500-1000 >1000

M&As Total $M # of M&As

$m #

Page 18: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

Table: M&A deals by deal size (2005-2014)

Deal Size Range Number of Deals Deal Amount

($m)

Below $10m 54% 463 2% 962

$10m - $50m 25% 209 9% 4,610

$50m - $100m 7% 60 8% 4,253

$100m - $500m 13% 110 44% 22,168

$500m and above 1% 12 36% 18,152

Total 854 50,155

Israeli high-tech M&A

transactions totaled $50.1

billion in the 2005-2014

period.

80% of the capital was from

deals of more than $100

million, which accounted for

only 14%of the total number

of exits.

43% of all M&A deals were

VC-backed exits and 65

percent of those in the $100

million-$500 million range

were VC-backed as well.

In other ranges, 37 percent

of the deals were backed by

VC funds.

Page 19: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

M&A Deals: The Deal Size Mix (# of deals vs. $m)

Since 2011, the deal size mix

– or how the various M&A

deals break down into groups

– has been changing.

We’ve seen beginning in

2011 the reemergence of

M&A deals above $500

million. Such deals are still

relatively infrequent, while

deals between $100 million

and $500 million have

become far more common

and now represent a large

percentage of total M&A

proceeds.

In 2014, the number of

$100m-$500m deals

increased by 45% and total

dollar proceeds from this

segment increased 13%,

from the previous year.

Since 2012, the number of

small deals, under $10m has

been decreasing, with 33

deals in 2014 comprising

only 40% of the number of

deals, compared to 48% in

2013 and 58% in 2012.

52 53 49 46 53

37 49 51

40 33

9 18 22 26 16

20

28 19

24 27

6

9 8 8 1

9

5 5

4 5

8

13 12 7

10 7

16

10 11 16 1

3 1

3 3 1

0

20

40

60

80

100

120

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

208 383 498 574 362 429 701 404 531 521 418 562 576 606

82 609 387

342 246 425

1,390

2,134 2,481

1,399 2,051 1,254

3,504

2,475 2,571 2,910 634

6,851

517

6,434

2,816 900

0

2000

4000

6000

8000

10000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

<$10m $10m-$50m $50m-$100m $100m-$500m >=$500m

$m

#

Page 20: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

M&A deals above $100 million: More deals less dollars

Now account for more than 20% of deals

76

96

91

87

80

73

99

88

82 82

88% 83%

87% 92%

88% 90%

83% 85% 83% 79%

12%

17% 13%

8%

13%

10%

17%

15% 17%

21%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

20

40

60

80

100

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

<$100m >=$100m

#

Bringing under 80% of capital

2,753

10,061

3,658

2,701 2,590 2,375

5,206

9,736

6,227

4,838

26%

11% 32% 48%

21% 47%

23%

8% 13%

21%

74%

89%

68%

52% 79% 53%

77%

92%

87%

79%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

-

2,000

4,000

6,000

8,000

10,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

<$100m >=$100m

$

The changing deal size mix, can also explain why deals above $100m are more prominent, while the total dollar

proceeds they bring in seems to be smaller than the previous two years. It is a result of the facts that while there are

indeed more deals above $100m, there are less deals on the far extremes. In years where the total share reached

~90%, it was a direct result of the very few deals above $1 billion.

Page 21: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

Average Israeli M&A Deals* 2005 –2014 ($m)

In 2014, the average M&A*

deal was $59 million, up 33%

from the $44 million 10-year

average.

The average deal size

climbed markedly since the

beginning of 2011, and the

past four years averaged $57

million excluding deals above

one billion dollars.

Throughout the past 10

years, the average VC-

backed M&A was

significantly more than the

average deal, by about 34%,

2005 being an exception to

that rule.

The average VC-backed

M&A shows a relatively

steady incline since 2008.

While 2014 figures reflect a

slight decline, VC-backed

M&As remained 23% above

the 10-year average, as well

as above the average M&A

deal last year.

36.2

42.6 40.2

31.0 32.4 32.5

52.6 54.4

62.1

59.0

33.9

56.0

59.5

40.7

48.8 49.8

67.6

73.3

84.4

76.7

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Average M&A Deal ($M) Average VC-Backed M&A Deals ($M) *Excluding deals above $1 billion

Page 22: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

AVERAGE RETURN ON EQUITY

2014 M&A return on equity ratio exceptionally high at 6.2

Page 23: IVC-MEITAR HIGH-TECH EXITS 2014 REPORTmeitar.com/files/Brochure/ivc-meitar_exits_report_2014.pdf · 2015-01-08 · IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd

IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

Average M&A Return on Equity (ROE) Ratio* 2005-2014

Return on Equity (ROE) is

calculated as a ratio between

capital proceeds from exits

and the total capital raised by

companies prior to their exit.

The measure reflects the

relative value received by

company investors following

a company’s exit.

M&A return on equity ratio

reached an exceptional

average of 6.22 in 2014, a

45% increased from 4.29 in

2013. The number reflect not

only the exit proceeds, but

also the fact that many of the

companies to exit in 2014

raised relatively little capital

prior to their exit (less than

$10 million, on average),

VC-backed M&A ROE

decreased to 3.53, compared

to an exceptionally high 4 in

2013 (excluding the Waze

acquisition at $1.2B).

2.9 2.9

3.3

2.3

2.7

2.1

4.4

3.6

3.6

6.2

1.5

2.4

2.0 1.9 1.9 1.8

3.2

2.6

4.0

3.5

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Total Average Ratio VC-Backed Average Ratio

*Excluding deals above $1 billion

Ave

rage

RO

E R

atio

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IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

High-Tech Exits 2010-2014: Average Return On Equity by Sector

2010 2011 2012 2013 2014

Average ROE 1.79 4.04 7.44 4.25 4.95

Communications 1.70 1.98 17.60 2.72 9.76

Internet 2.57 8.25 1.48 1.76 5.73

Software 1.69 1.85 5.90 8.19 4.24

Semiconductors 3.12 7.28 3.72 4.09 5.04

Life Sciences 1.29 2.40 2.40 9.27 2.18

Looking at ROE for all exits,

including M&As and IPOs, we

see great variance and

fluctuations in average ROE

ratios in cleantech and

miscellaneous technologies –

the sectors attract little VC

investments because of their

problematic time-to-exit life

cycle, but can afford

exceptionally high returns as

well.

Zooming in on the sectors that

attract most investments we still

find differences over time, and

between sectors.

In 2014, three of these sectors

managed to reach ROE ratios

that exceeded the average

ROE, with communications

showing the highest returns,

despite the relatively low

volume of deals. While all five

sectors in the table on the right,

showed positive returns, life

sciences did not perform as

well compared to other sectors

or to its phenomenal 2013

success.

0

5

10

15

20

25

30

35

40

45

50

2010 2011 2012 2013 2014

Average ROE Communications Internet

Software Semiconductors Life Sciences

Cleantech Miscellanous Technologies

Ave

rage

RO

E R

atio

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IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

M&As – THE ACQUIRER SIDE Israeli high-tech companies play an increasing role on

the spending side of M&A equation

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IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

2014 High-Tech M&As: Acquirers by Country of Origin

An analysis of the identity of

the acquiring companies –

the companies on the other

side of the exit deal,

revealed that nearly 30% of

deals involved a local

company as the acquiring

company, as well as the

acquired.

While the majority of

acquirers are North

American, mainly from the

USA, of 82 Israeli high-tech

M&As in 2014, 24

companies were acquired

by other Israeli companies,

compared to 19 such deals

in 2013.

The year’s largest deal by

an Israeli acquirer was the

acquisition of Pilat Media by

Sintec.

Imperva, Wix and Somoto

each made two acquisitions,

as well.

39

24

9

5

4 1

United States & Canada

Israel

Mainland Europe & Russia

United Kingdom

East Asia

New Zealand

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IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

Acquisition Made by Israeli High-Tech Companies 2005-2014

The surprising prominence of acquisition activity

involving Israeli companies, led us to look at Israeli

high-tech companies as acquirers rather than the

acquired. We examined not just acquisition of local

high-tech companies, but all M&As where an Israeli

high-tech company played the role of the acquirer,

regardless of the identity of the acquired.

The year 2014 proved to be more dynamic than the

previous two years, as 42 Israeli high-tech

companies made at least one acquisition, with 57

acquisitions taking place overall.

This is yet more evidence that Israeli high-tech

companies are seeking growth, in this case by

choosing non-organic growth strategies, or lateral

expansion by acquisition. This approach is

diversifying the more conventional strategies

applied by companies such as capital raising,

developing new products, expanding markets, jobs

and sales.

31 32

55

49

33 35

40

26

30

42 35 36

79

65

49 47

58

33

39

57

0

10

20

30

40

50

60

70

80

90

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

# of Israeli High-Tech Acquirers # of Acquisitions made

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IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

About this report:

• This report contains information derived from the IVC-Online Database

• The report summarizes exits of Israeli high-tech companies in merger

& acquisition deals and initial public offerings in 2005-2014

• 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 last section of the report also references M&A deals where Israeli

high-tech companies acted as the acquiring party.

• Complete information on M&As and public offerings will be published

in IVC High-Tech Yearbook 2015 due April 2015.

All Rights Reserved. Copyright of IVC Research Center Ltd. 2015

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IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

About Meitar Liquornik Geva Leshem Tal:

Meitar Liquornik Geva Leshem Tal is Israel’s largest law firm and an undisputed leader in the technology sector.

The firm's Technology Group numbers over 90 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.

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IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.

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 12,000 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.

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IVC-Meitar 2014 Exits Report Prepared by IVC Research Center Ltd.