Lawyers from Epstein Rosenblum Maoz (ERM) provide an overview of the latest corporate developments in Israel
2021 was an exceptional year for the tech ecosystem in Israel, with corporate transactions reaching new record highs. Israeli start-ups raised some US$ 25.6bn during 2021 – a leap of almost 150% from 2020, in over 750 financing rounds – and saw a push towards growth financing, with over 60% of investments being made at round C or later. Over 30 new unicorns were born, and Israel’s strength as a hub of innovation, especially in digital and cyber,
were particularly in demand over the last year.
Here, six of Epstein Rosenblum Maoz (ERM)’s corporate partners, set out their predictions for trends to watch in 2022 and beyond, drawing from the firm’s experience as a leader in corporate law.
Nimrod Rosenblum: The fall (?) of de-SPACs and growth of hyper strategic investments
2021 was, alongside the surge in growth capital into Israeli mid and late-stage startups, a massive year for the listing of Israeli companies via de-SPAC transactions, with high valuations and great excitement for investors, entrepreneurs, and employees. Following the significant drops in valuation
of the vast majority of such companies, we have already seen a fall, and expect to see a further fall, in the number of de-SPAC’s during 2022 and beyond. That being said, Israeli technology is still a dominant force and this expected fall is likely to be met with a corresponding increase in M&A and investment into solid growth-stage companies. Indeed, as deal sizes jumped significantly over the last 24 months, not only have we seen huge investments and acquisitions led by the likes of global investment firms, but also a massive increase in the number of mega-investment rounds being led by strategic players – in cyber, fintech, medical devices, and consumer goods.
2021 was a massive year for the listing of Israeli companies via de-SPAC transactions, with high valuations and great excitement for investors, entrepreneurs, and employees.
Ron Abelski: The middle-market’s source of innovation in Israel
Given the completely disproportional number of unicorns, and mega deals in the Israeli market, it is easy to forget that for hundreds of middle-market organisations around the world, Israel provides a reliable source of innovation. Our experience in acting for UK and mainland European-based companies on their investments and acquisitions of Israeli enterprises continues with full speed. As the need for digital and cyber-security solutions continues to persist, we expect to see even more middle-market organisations look to Israel for sources of innovation and support in these areas, as well as in a wide range of other sectors where the middle-market has traditionally been more active.
Galit Farkash: Continued investment in cyber and digital
A clear trend seen throughout the Covid-19 pandemic was the accelerated adoption of digitalisation and the imperative need for cyber protections. The Israeli technology scene has traditionally been very strong in these industries, and we have seen this in the number of transactions, the huge valuations, and the continued international interest in companies active in these fields. 2022 will no doubt see continued activity in these areas.
Jeremy Seeff: ESG
Though ESG has been growing in prominence over the last few years, Israel is likely to see a huge increase in the impact of this trend in 2022 and beyond. With a renewed focus on renewable and climate-tech (especially in solar), and momentum building up on issues of diversity & inclusion, we are starting to see institutional players add ESG metrics into their investment theses. As a firm, we support non-profit organisation LGBTech, and expect to see ESG topics gain significance in due diligence processes for investments and acquisitions, as well as in commercial activities.
Though ESG has been growing in prominence over the last few years, Israel is likely to see a huge increase in the impact of this trend in 2022 and beyond.
Simon Marks: increase of inbound and outbound activity
The Israeli economy continues to demonstrate how robust it is, with year-on-year improvements, a strengthening of the shekel, and the huge increase in local unicorns and growth-companies. Many of these companies have raised significant funds, often as part of an acquisition-based growth strategy. As a result, we have seen a big jump in the number of Israeli companies making acquisitions and investments abroad. From cyber-security companies seeking out talent in Eastern-Europe, to travel tech companies expanding across the globe, a once more typically inbound market, is maturing into a market with global companies as well as just the technological base that was historically seen as a source of targets for acquisition.
Rotem Perelman-Farhi: A new privacy law
With new privacy laws popping up all around the world in the last few years, trying to cope with privacy challenges presented by modern technology affects the entire business and tech community. Indeed the Israeli government has issued an extensive proposal to amend the 1981 Israeli Privacy Protection Law (the “PPL”) which is being reviewed and discussed by the Israeli Parliament’s ‘Constitution, Law and Justice Committee’. Although, as of Q1 2022, the proposed revision is yet to be finalised, it is clear that its objectives are to increase the controls and enforcement abilities of the Israeli regulator (the Privacy Protection Authority), and to update the obsolete PPL to the rapid changes in technology and to modern privacy legislations like the GDPR and the CCPA.
Nimrod Rosenblum, Head of ERM’s M&A & Private Equity practice
Ron Abelski, Partner in ERM’s M&A & Private Equity and Start Ups & Venture Capital practices
Galit Farkash, Partner in ERM’s M&A & Private Equity and Start Ups & Venture Capital practices.
Jeremy Seeff, Partner in ERM’s M&A & Private Equity and Start Ups & Venture Capital practices
Simon Marks, Head of ERM’s Start Ups & Venture Capital practice.
Rotem Perelman-Farhi, Head of ERM’s Technology, IP & Data practice.