Israeli Tech Exits Decline 80% in 2022 to $16.9 Billion

2022 proved to be a difficult year for the tech industry in Israel, as the number of ‘exits’, which refers to initial public offerings (IPOs) of shares, or mergers and acquisitions, decline 58% as opposed to last year.

This was because investors and entrepreneurs were driven into wait-and-see mode because of higher interest rates and uncertain valuations.

Tech exits decline

There was a whopping 80% drop in the value of tech exits in Israel this year, including IPOs and M&As, as compared to the previous year.

Consultants PwC Israel published the 2022 Israel High Tech Exit report, which disclosed that the value of Israeli tech exits in 2022 stood at $16.9 billion.

There was a 58% drop in the number of deals, which had been 171 in 2021, but were 72 in 2022. As far as the value of the deals is concerned, the average dropped almost 50%.

Last year, the value of the deals had stood at $482 million, but it fell to $235 million this year. There had been a surprising 520% jump in exits of Israeli tech firms in 2021.

They had increased in value by an astonishing $81.2 billion, which had seen all previous funding records shattered because companies were able to raise private investments worth $25.6 billion.

Company valuations were high due to the massive inflow of funds and some companies were also overvalued, as they were not generating a profit.

The change

However, things had changed in 2022, as the market begin to turn and this saw publicly traded shares and valuations take a battering because of high inflation and rising interest rates.

The Russia and Ukraine conflict also affected the global supply chain and the overall economy, which pushed investors to hunker down.

Thousands of workers have been laid off due to the market downturn, which has resulted in funding pullbacks and new tech offerings are now dealing with a bear market.

Therefore, Israeli tech exits have returned to levels that had been seen in 2020 in which there were total 60 deals that were valued at $15.4 billion and 80 deals in 2019 valued at $9.9 billion.

The analysis

A partner at PwC Israel, Yaron Weizenbluth, said that the local high-tech market had continuously climbed for a long stretch of time, as a number of deals had been made and valuations were on the rise.

However, he said that 2022 had seen a significant slowing down, as there was rampant inflation in the market.

This had given rise to uncertainty and interest rates had been pushed up to deal with it, while sellers and investors were left waiting on the sidelines to see how things would turn out.

Weizenbluth added that sellers were no longer interested in making transactions that have a value lower than expected.

As far as buyers are concerned, they are also not ready to close deals because of the uncertain reality, as they know that there is a possibility that the prices might be overblown and not accurate.