PwC Israel: 40% decrease in the number of merger and acquisition transactions in 2022

PwC Israel's mergers and acquisitions report for 2022 shows a 40% decrease in the number of merger and acquisition transactions, compared to a minor increase of 5% in the financial scope. The total number of transactions totaled approximately 18 billion dollars. 38% of the transactions were carried out by Israeli companies that also purchased other Israeli companies, totaling approximately 3.5 billion dollars.
The report also shows that the average deal value rose to $202 million in 2022, one of the highest in the last decade, and reflects an increase of 16%, compared to the average deal value in 2021 which was $126 million. It should be emphasized that excluding the Unity and Iron Source deal amounting to 4.4 billion dollars, the average value is 154 million dollars. The total amount of the transactions disclosed to the public in 2022 is about 18 billion dollars, which is, as mentioned, an increase of about 5% compared to 1.17 billion dollars in 2021.
During 2022 there were 38 transactions in which Israeli companies purchased Israeli companies. The most prominent of which were: the Egged - Keystone deal in the amount of 846 million dollars, the Freshmarket - Paz deal in the amount of 786 million dollars and the Medigate - Calroti deal in the amount of 400 million dollars.
Also, an amount of approximately 2.3 billion dollars was invested in the past year in transactions carried out by Israeli buyers when the purchased was a foreign company. The number of strategic transactions was 130, with an average value of 198 million dollars, and is the more significant share due to the trends that characterized the year 2022 and the desire of companies to continue to show growth, focus on strategy, and create a relative advantage against competing companies.
CPA Liat Anzel, who is responsible for acquisitions and mergers at PwC Israel: "What you can see without a doubt in 2021 are signs of a slowdown. From quarter to quarter we see fewer transactions. This is due to the fact that companies, against the background of economic uncertainty, want to keep the money and are sitting on the fence. Because of the increase in interest rates, there is less money available to companies, and in addition, companies have not internalized the situation and are still asking for high values, when opposite the buyers realize that the situation has changed and are not willing to pay the values that were in the past.
"Another trend we have seen is that Israeli high-tech continues to produce the majority of acquisitions and mergers. Most of the acquisitions still come from the US, but Israeli companies are fully in the game and have made significant deals. This is a sign of the maturity of the Israeli market, that Israeli companies do not see themselves only as a target for acquisition, but acquire themselves, with the aim of increasing and improving the company."
The reason that, despite a decrease in the number of transactions in 2022, their total financial volume did not decrease is due to: "We are looking at transactions that were closed and started even before the crisis with high values, so we see a decrease in the number of transactions but not in the financial volume that resulted from the high value."
"We anticipate that in the coming months there will be a halt. The total number of transactions in 2022 amounted to 142, this compared to 2021 which included 238 transactions. It can be seen that the amount of transactions decreased from quarter to quarter in 2022, which may herald a significant slowdown in the amount of transactions next year as well, But there is still a lot of money available in the market and companies that are in a less good situation will be candidates for acquisition. Therefore, the market will continue to be active. It seems that the decrease in valuations in question has not yet penetrated the local mergers and acquisitions market, which is expected to bring in additional players who avoided the high price environment of the last two years."
"There was a retreat in the amount of investors from East Asia and Europe, and the USA became stronger at their expense with about 86% of the total volume of transactions, a record of recent years. East Asian investors plunged from about $760 million to $34 million, and almost disappeared. A total of 50 transactions were carried out by North American buyers, for a total amount of approximately 7.9 billion dollars. In addition, there is a noticeable decrease in the activity of financial buyers, only about 8% of the total amount of transactions closed in 2022 were carried out by financial buyers (12 transactions), a figure that is a negative record in relation to the total amount of transactions and a decrease from 2021, when the number of transactions made by financial buyers stood at 18.
Does Kater Hi-Tech continue to lead?
"Yes, together with an increase in the energy sector. The volume of transactions in high-tech continues to lead the market and stands at approximately 9.3 billion dollars in 2022, the second highest amount after the record recorded last year. The total transactions of the energy sector amounted to approximately 1.6 billion dollars, this compared to the total of 917 million dollars in 2021 - a jump of 76%. The jump is in light of three transactions carried out by Ithaca (Delek's subsidiary), among them the purchase of the energy company Sikar with an estimated value of 1.1 billion dollars. At the same time, the consumer goods and services sector amounted to approximately 7.1 billion dollars Following Keystone's purchase of Egged and the completion of the purchase of the Freshmarket supermarket chain by Paz. Also, the merger of Bank Leumi's operations arm in the US with the American bank - Bank National Valley, led to a jump in the value of transactions in the financial sector."