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The decrease in IPOs by Israeli companies is mainly attributed to the availability
of private investments with similar valuations. While in previous years some Israeli
companies were unable to raise funds privately, private investments have now
become more accessible. When public markets provide similar valuations to those
offered by private investors, many companies opt for private placements rather
than IPOs.
Regulatory intervention played a major role in the M&A market with conflicting
effects. On the one hand, regulators vetoed a number of major transactions in the
making. On the other hand, recent changes in Israeli regulation have generated a
flow of transactions that were necessitated in order to comply with such regulatory
changes.
Examples of acquirers whowere forced to abandon contemplated transactions due
to regulators’ intervention include the acquisition by Fosun, a Chinese investment
company, of the Israeli Phoenix insurance company. This was not completed after
the insurance regulator declined to approve the transaction. Cellcom, a cellular
operator, was unable to close the acquisition of a competitor, Golan Telecom, due
to objections of the Ministry of Communications and the Antitrust Commissioner.
A good illustration of Israeli regulation which is expected to serve as a catalyst
for M&A activity is the Law for the Promotion of Competition and Reduction
of Concentration, 2013. Among other things, the Law mandates a separation
between large industrial companies and financial services institutions (including,
banks, investment houses, pension funds and insurance companies).Consequently,
shareholders who control both significant financial and non-financial entities are
required to dispose of their interests in one of the two entities, by no later than
the end of 2019.
The aborted sale by Delek Group of its controlling stake in Phoenix (and its newly
contemplated sale to Yango Holdings), as well as the contemplated sale by IDB of
its stake in Clal Insurance are examples of transactions that are a direct response
to the Law and to other regulatory constraints. We expect that the number of
such transactions will significantly increase as we approach the statutory deadline
for compliance.
The Reduction of Concentration Law imposes restrictions on pyramid structures
in conglomerates that have issued multi-level public equity or debt. In order to
comply with such restrictions, it is expected that several Israeli traded companies
will be forced to divest links in their corporate chain of holdings. Similarly, the
recent initiative of the Ministry of Finance to detach credit card companies from
Israeli banks is expected to result in several transactions in a market which, for
years, has not seen any significant movement.
Another catalyst for transactional activity is the forced sale of companies in
distress, involving complex debt reorganization. A notable example of such
Regulatory intervention played a major role in the M&Amarket with conflicting
effects. On the one hand, regulators vetoed a number of major transactions
in the making. On the other hand, recent changes in Israeli regulation have
generated a flow of transactions that were necessitated in order to comply
with such regulatory changes.