PwC: "Sharp Decline iof 46% in Mergers and Acquisitions Rocks Israeli Market in 2023"

Israel experienced a significant downturn in its economic landscape in 2023, as reported by leading financial services firm PwC. The total value of transactions, mergers, and acquisitions plummeted by an alarming 46%, reaching a meager $9.8 billion compared to the robust $18 billion recorded in 2022. These figures mark the lowest in the past decade, excluding 2014 when the total transactions amounted to $7.2 billion.

PwC's comprehensive report reveals a notable decrease in the number of transactions, with only 110 recorded in 2023 compared to 142 in the preceding year. This downturn represents a negative record in recent history and raises concerns about the health of the Israeli market.

Foreign investments, a cornerstone of the local market, also took a severe hit, witnessing a sharp 41% decline to $6.7 billion in 2023. The report attributes this decline to the apprehension of foreign investors, who were wary of political and social instability in Israel, exacerbated by the conflict colloquially referred to as the "war of iron swords."

CPA Liat Anzel Aviel, from PwC, emphasized the unprecedented nature of the market slowdown in Israel compared to global trends. Aviel links the downturn to the pervasive political and social uncertainty throughout 2023, with foreign investors seemingly hesitant to engage in transactions and business activities within the Israeli market.

Aviel also noted that despite the challenging environment, transactions that reached the closing threshold were completed, albeit at a slower pace for new deals. PwC anticipates a potential market boost in the upcoming year, citing an expected interest rate cut that might attract investors.

The decline in the volume of major transactions is attributed to investors' preference for deals with lower risk levels. Notably, the average value per transaction in 2023 is one of the lowest in the past decade, excluding the $6.3 billion Imperva deal purchased by Thales.

The report indicates that the downturn was evident even before the security escalation in October and points to a global trend that began in the latter half of 2022. The Israeli market suffered disproportionately in the first three quarters, primarily due to political and social uncertainties.

Furthermore, the report highlights the impact of the global hi-tech crisis, which significantly affected the Israeli market throughout 2023. While signs of recovery are emerging in the United States and Europe, Israel lags behind, causing concerns about the growing gap between the country and the rest of the world in terms of market trends and recovery rates.

Despite the challenges, the report suggests that the Bank of Israel's forecast to lower interest rates and available capital waiting for opportunities could lead to deals, especially for companies facing financial difficulties. Importantly, the demand for technology and innovation remains robust, showing an increase over time, particularly in fields such as artificial intelligence, cyber, energy, medicine, and fintech.