M&A transactions in Israel fall by 46% to $9.8 billion in 2023
M&A transactions in Israel fall by 46% to $9.8 billion in 2023
A PwC Israel report shows that M&A transactions dropped in the last year to their lowest level in a decade
Mergers and acquisitions involving Israeli companies in 2023 fell by 46% to $9.8 billion, according to a report by PwC Israel. The total value of transactions fell by almost half compared to the $18 billion registered in 2022 and is the lowest in the last decade and second only to 2014, when the amount was $7.2 billion. The total number of transactions in 2023 reached 110, compared to 142 in 2022.
The average transaction value in 2023 plummeted to $131 million, indicating a 35% decrease compared to the average transaction value in 2022, which stood at $202 million. Additionally, there was a decline in the number of mega-deals (deals greater than $1 billion). PwC estimates that the lower average transaction value and the decrease in the volume of large transactions are influenced by investors' preference for deals with lower risk levels and the decline in valuations from 2021 to 2022. The report emphasized that the significant decrease in the number and size of transactions was evident before Hamas’ attack on October 7 and the subsequent war.
Examining the first three quarters of 2023 compared to the parallel period, there was a 60% and 21% decrease in volume and the number of transactions, respectively. PwC points out that the sharp decline in all metrics is influenced by the global trend that began during the second half of 2022. Regarding the first three quarters of the year, it is clear that the impact on the Israeli market is higher compared to the global trend, and it can be attributed to political and social uncertainty in Israel.
Liat Enzel-Aviel, Partner and Transaction Services Leader at PwC Israel says that, "Changes in the global macro-economic environment that began in the second half of 2022 and characterized 2023 led to high uncertainty in the global and local markets. High and fluctuating interest rates, difficulties in fundraising, market volatility, geopolitical instability, and persistent concerns about regulation and high inflation levels contributed to the instability that slowed down the rapid pace of mergers and acquisitions that characterized 2021-2022 and, in general, lowered investor motivation for deal-making.
“However, it is evident that the decline in M&A activities in the Israeli market is stronger compared to the global trend. We attribute the significant slowdown in the Israeli mergers and acquisitions market largely to political and social uncertainties prevalent in Israel during 2023, surrounding the judicial reform and its widespread protests."
The report also showed that foreign investments in Israel, which makes up the majority of investment in the local market, declined to only $6.7 billion in 2023. This represents a 41% decline compared to 2022 and the lowest in the last decade. This decline is largely attributed to the concerns of foreign investors regarding political and social events in Israel in 2023, as well as Israel’s ongoing war with Hamas.
The high-tech sector continued to lead the local mergers and acquisitions market this year with a transaction volume of about $8 billion, constituting about 81% of all deals. Against the backdrop of a sharp decline in overall sectors and specifically in the high-tech sector, this sector accounted for over 80% of all deals. This is a record data point in recent years, indicating both the relative strength of this sector and, on the other hand, the concentration of the Israeli market and the reliance on the high-tech sector, even in times of crisis.
First published: 17:31, 13.12.23
