With record-breaking acquisitions of Israeli start-ups by multinational corporations in 2017, what does 2018 have in store for Israel?
Changes in the US tax code – cutting the corporate tax rate from 35% to 21% – could reduce incentives for American investors who once deemed Israel’s 23% rate as a relative bargain. While the tax cut will give US companies more cash to play around with, it could also pressure Israeli start-ups to incorporate in or move operations to the US.
Also in the past year, mergers and acquisitions with Israeli pharmaceutical firms out-valued transactions and exits of hi-tech firms, according to a report by consulting firm PwC Israel published last month. That is attributable to debt-laden Teva Pharmaceuticals selling some investments. In 2018, it is likely that hi-tech M&As will be worth more than drug companies.
While Americans remain the biggest foreign investors in the Jewish state, Chinese investments into Israel are likely to increase and overtake the US in a few years. Last year, Chinese regulators moved to crack down on foreign acquisitions in real estate, sports, entertainment and other fields. But the government then clarified that tech-related firms would not subject to these restrictions.
Israeli hi-tech firms could benefit from the change in Chinese investment regulations, including companies specializing in artificial intelligence, advanced manufacturing, robotics, bio-tech, fin-tech and autonomous driving.
And a few months ago, the first IPO on a Chinese stock exchange by an Israeli hi-tech firm took place, as Alma Lasers went public in Hong Kong. This trend is likely to pick up in 2018.
It is unclear whether 2018 will match 2017 in terms of the size of foreign acquisitions of Israeli companies. Intel’s record-breaking purchase of Mobileye for $15 billion may not happen again soon. Other large acquisitions of Israeli firms in the past year include Mexico’s Mexichem buying a majority stake of drip-irrigation firm Netafim for $1.9b., and Japan’s Mitsubishi Tanabe Pharma Corporation buying pharmaceutical firm NeuroDerm for $1.1b.
On the Tel Aviv Stock Exchange, 17 companies issued initial public offerings in 2017, according to Calcalist, more than in 2015 and 2016 together. Fewer Israeli firms held a stock market listing internationally. And two prominent Israeli firms, Celltick Technologies Ltd. and Uzi maker SK Group, are reportedly already preparing for a 2018 TASE IPO listing.
Another dozen Israeli companies are looking at whether to hold an IPO abroad, especially on the New York Stock Exchange, NASDAQ and the London Stock Exchange.
Some companies that could possibly hold an IPO in 2018 include content recommendation firms Taboola and Oubrain, the two industry leaders, according to data from the IVC Research Center. And Israeli cybersecurity firm Skybox Security and Taxi-hailing smartphone app Gett could also go public this year.
TASE is changing its rules and listing requirements, in the process trying to attract more companies. The Israel Securities Authority has drafted an amendment to add Hong Kong, Singapore and Toronto to its list of recognized exchanges, also allowing dual listing.
In early 2018, the government is set to launch four tech-related investment funds, each of which holding NIS 400 million ($116m.) in assets.
And macro-economically, Israel can expect GDP growth of around 3.5%, according to data from market analyst BlueStar Indexes. That comes despite the mass layoffs at Teva Pharmaceuticals, the nation’s largest company by market value.