Mind the Tech NY 2024"We anticipate increased interest from American entities in M&As with Israeli companies”
Mind the Tech NY 2024
"We anticipate increased interest from American entities in M&As with Israeli companies”
Lonne Jaffe, Managing Director at Insight Partners, was speaking on a panel at Mind the Tech NY with Len Rosen, CEO Israel & Senior Managing Director at Evercore, Bart Osman, Partner at Lexington Partners, and Fiona Darmon, Managing Partner at Sunvest Capital Partners
Turning the Tide and the Great Market Reopening panel
(Photo: Orel Cohen and Tomeriko)
"We have three very smart individuals here with us who will be able to provide insights on the near future," Fiona Darmon, managing partner at Sunvest Capital Partners, opened the session she moderated at the Mind The Tech New York 2024 conference. The conference focused on Israeli high-tech but acknowledged its interconnectedness with global economic dynamics. Darmon addressed the first question to Len Rosen, CEO Israel and Senior Managing Director at Evercore, asking him to describe his perspective on current world events.
Rosen replied, "What we observe today in the global economy is that the most influential factors are inflation and interest rates. Markets are responsive to the expectation of decreasing interest rates, which initially rose to combat inflation, according to statements predominantly made by heads of the American central bank. The Fed has commendably managed to lower inflation, but the ongoing battle will pose challenges."
Lexington Partners recently raised the largest secondary fund ever, amounting to $22.7 billion. Bart, could you please share recent investments and your current outlook?
Bart Osman, a Partner at Lexington Partners, responded, "We operate in two key areas: secondary, involving the purchase of shares from existing shareholders, and co-investment, entailing joint investments alongside entities like Insight Partners. We are raising a new $4 billion fund in this area. There has been significant activity in the secondary sector recently, with numerous portfolio pieces entering the market. We also see opportunities in direct transactions, with banks and private credit players actively seeking investments."
Darmon interjected after Osman's remarks, stating, "In the last nine months, we've observed a notable influence from pension funds and other institutional entities increasing their exposure to private equity. However, market downturns led to reevaluations of allocations, prompting some to halt investments or divest from private portfolios, shaping the landscape Osman discussed."
“Lonne, as a key technology investor, could you share your recent activities and your outlook?" Darmon asked Lonnie Jaffe, Managing Director at Insight Partners.
Jaffe noted, "In recent months, there's been a slowdown in startup investments. Companies that secured funding during the high tide of 2021 have avoided immediate fundraising needs, benefiting from a less favorable macroeconomic environment. Investors now prioritize proven companies over speculative ventures."
Darmon inquired about the impact of declining transaction rates on the Israeli market.
Jaffe responded, "It's challenging to discern whether the decline mirrors global trends or unique Israeli conditions. While some Israeli companies face challenges, others cater to resilient markets, like those predominantly composed of international clientele. For instance, Bluewhite Robotics, a recent investment, continues to thrive amid market shifts. Additionally, we've observed talent migration toward companies poised for significant growth."
Darmon added, "Local market dynamics underscore continued deal-making, driven by Israeli companies' resilience and international market focus."
"Bart, could you provide insights into current deals and investor preferences?" Darmon asked.
Osman replied, "Our new secondary fund secured $400 million from 13 Israeli investors. We've seen interest in venture capital purchase transactions, a sector where portfolios are actively traded. Direct investments, particularly in tech and healthcare, remain robust. Investors favor the secondary sector due to available portfolios post-market disruptions, offering diverse opportunities."
Darmon elaborated, "Lexington's recent acquisition of a portion of Tiger Global fund's portfolio highlights emerging opportunities amidst market shifts."
"Len, from an Israeli perspective, how do you assess the current landscape?" Darmon queried.
Rosen responded, "From mergers and acquisitions to IPOs, Israel has experienced stagnation since October 7. The IPO market worldwide has been largely frozen, with attention shifting to large, profitable companies exhibiting growth potential. Despite challenges, major players like Google and Microsoft remain active in the Israeli market, signaling ongoing opportunities."
"Lonne, as a technology investor, what do you foresee for 2024?" Darmon asked.
Jaffe remarked, "We anticipate increased interest from American entities in acquisitions and mergers with Israeli companies, particularly in deep-tech sectors like cybersecurity and AI infrastructure. We'll also capitalize on opportunities presented by early-stage investor exits to fuel substantial company growth."
Darmon concluded, requesting each participant to offer a motivational statement or advice based on their outlook.
Rosen emphasized Israeli high-tech's resilience, citing the outperformance of major Israeli companies amid challenging cycles, expressing optimism for the future. Osman commended the commitment of the Israeli entrepreneurs amid adversity, finding reasons for optimism in the global economy. Jaffe highlighted the potential for substantial investment returns during downturns, advocating for seizing opportunities amidst challenges.
