- Irrational Exuberance - The approval and distribution of vaccines created to prevent COVID-19 may fuel a rush of activity in Israeli and global markets eager to return to normal activity and make up for the “lost year” 2020, which saw a significant decrease in deals in some sectors. However, we still have a lot to learn about the vaccines’ efficacy, how long it will take for enough doses to be manufactured and administered, and how long it will likely take for economic activity to take a solid upward trajectory that supports new business initiatives.
- Rational Exuberance – On the other hand, the pent-up demand for deal making is real. Capital flows toward opportunities like water flows downhill, and reduced activity this year also means lost time value, which must be made up by professional investors and serial acquirors. Provided that deal makers act with an in-depth understanding of the issues COVID-19 has presented in the business landscape – some of which are here to stay for the foreseeable future -- opportunity will come knocking. There will be cautiously optimistic investors who will likely participate in transactions that present actual opportunities, and not ones executed to “make up for lost time”.
- Innovation is King- While it is customary to say that Cash is King, companies and investors that have significant liquidity are likely not utilizing their money efficiently. In 2021, companies will redouble their focus on investments that emphasize disruptive innovation. Israel has long been dubbed the “Startup Nation”, thanks to over 600 technology companies founded annually. Leaning toward innovation is certainly not a new trend, but we expect that the post-pandemic perspective will sharpen its significance even more greatly in 2021.
- Bullish Capital Raising in Tech Market to Continue – In 2020 Q3, the amount of capital raised for tech companies in Israel was nearly equal to the entire amount raised in 2019 - surpassing all historical capital raising for Israeli tech. Capital being raised for Israeli tech companies increased by 26% compared to the same quarter in 2019. This trend will continue.
- Several Industries are Poised for Robust Growth – These include Health & Life Science, Artificial Intelligence (AI), Agritech, Cyber Security, Fintech and Mobility.
About the Author
Joey T. Shabot is the managing shareholder Greenberg Traurig LLP’s Tel-Aviv office and focuses his practice on mergers and acquisitions and corporate venture capital, including corporate law, securities and financing.