ISRAEL
April 2015
Legal Business
85
but also by the attractive valuations. ‘You get
more bang for your buck,’ says Ben-Yehoshua.
Israeli companies have limited access to
capital compared to their US equivalents
and so their valuations tend to be
significantly lower. ‘The companies are
under-priced. The same company would
cost three times more in Silicon Valley,’
comments Yair Geva, the head of the China
desk at Herzog Fox.
Barnea & Co founding partner Michael
Barnea also believes that investors benefit
from a slightly more convivial environment
when chasing deals: ‘In some respects
because of the geopolitical limitations,
there is less competition for certain deals.
Investors may not face as much competition
for business as in the US or UK.’
Such valuations have not prevented
some sizeable transactions getting through.
This includes China National Chemical
Corporation (ChemChina) acquiring Israel’s
Makhteshim Agan Industries for $2.4bn
in 2011. Herzog Fox advised Makhteshim
Agan, with fellow domestic firm GKH Law
Offices advising ChemChina.
Large delegations of Chinese are routinely
witnessed in Israel looking at investment and
acquisition opportunities. Hong Kong tycoon
Li Ka-shing donated $130m to Technion,
Israel’s leading engineering university in
2013, as part of a deal to establish a joint
academic venture with Shantou University
in China’s Guangdong Province. The venture
will create the Technion Guangdong Institute
of Technology.
Geva says that while China is eager
to acquire some of Israel’s innovation at
attractive prices, the trend is mutually
beneficial. Israel’s tech companies for the
most part have not struggled for funding as
investors have been able to envisage healthy
returns in the short-to-medium term. ‘Israeli
venture capitalists
tend to focus either
on areas where Israel
has dominance,
such as military-
related technologies,
or sectors that
are less capital-
intensive such as
new media, internet
and telecoms,’
he comments.
He points to
the $1.1bn sale of
Israeli smartphone
navigation
application Waze to
Google in 2013 as
an example where
investors have made
a successful exit.
Cleary Gottlieb Steen
& Hamilton and
Israeli firm Goldfarb
Seligman & Co
represented Google,
while Waze was
advised by GKH Law
Offices and Silicon
Valley-headquartered
Gunderson Dettmer.
In contrast, the
biotech, healthcare
and medical devices
segment has
struggled because the
process of bringing products to the market
generally requires more long-term vision
and is more capital intensive. In this regard,
Israel’s rationale for seeking alternative
funding channels is based on shrewd
thinking. Neusoft Group, China’s largest IT
and software company, acquired a majority
shareholding in Aerotel Medical Systems
in 2014. S. Horowitz & Co advised Neusoft,
while Gelbard, Amit, Wesler – Law Office
represented Aerotel.
The red-carpet treatment for China has
not just been confined to the start-up and
emerging company sector. China Harbour’s
Pan Mediterranean Engineering Company
(PMEC) won the tender to construct the
Southport Terminal at Ashdod. There has
also been talk of the proposed high-speed
rail link between the Mediterranean and the
Red Sea – the ‘Med-Red’ – not even going to
tender and simply being handed to the
‘There is less
competition for
certain deals.
Investors may not face
as much competition
for business as in the
US or UK.’
Michael Barnea,
Barnea & Co
u
