William Blair & Co. has initiated a quarterly survey of Israel. The investment bank number two man, Corporate Finance Department head Richard Kiphart made a lightening visit to Israel, during which he visited a number of companies. He did not disclose their names, merely saying that the investment bank was looking for interesting companies seeking mergers or offerings in the US.
In the survey, William Blair says, “Israel is a hotbed for high-tech start-up companies.” It mentions 35 start-ups that it has chosen to monitor, and says that some of these companies will be sold or hold IPOs during the coming year. The review profiles three of these companies: GI View Ltd., which is developing a proprietary disposable system imaging the gastrointestinal tract; Press-sense Ltd., a provider of Business Flow Automation solutions for the commercial printing market; and Traiana Inc., which is developing on automated post-trade processing of financial transactions.
Kiphart says that, in addition to the companies that William Blair has marked as interesting, there are many more that could also be opportunities. “Companies in the sectors I mentioned, or technology companies could be suitable for offerings, but it should be a company that already has sales of its technology or software. It’s very hard to hold an IPO based only on an idea,” he said.
“Globes”: What about a company deliberating whether to hold an IPO or be acquired by a larger company?
Kiphart: “If we’re talking about a manufacturer in an industry that has solid, but not high growth, it might be able to obtain a higher price through a merger. The question that should be asked is, whether you have a company that will continue to grow and succeed in the long term. In that case, I advise an IPO.”
In the summary of the Israeli market, William Blair says, “Israel…is in many ways an emerging economy… The political risk level is high as well, although perhaps overstated considering its high profile. The country, however, is much further developed than many other emerging markets…The World Economic Forum ranked Israel 15th in its Global Competitiveness Index. Israel ranked well ahead of emerging countries across global regions such as Malaysia, the Czech Republic, and Chile, and also was ahead of some major developed nations such as France, Spain, and Italy.
“Israel’s standing has been rising for a variety of reasons. The government has accomplished important economic reforms, e.g., privatization of major state-owned enterprises, and has taken steps to improve capital market efficiency. Fiscal policy has meaningfully improved as well. Corporate tax reform, coupled with strong economic growth, has yielded steady increases in revenues, while spending discipline has limited growth in expenditures.
“The country has also made important strides in security with steps such as the building of the security fence and disengagement from the Gaza Strip…although the political situation remains uncertain considering factors such as developments in Iran, the country risk premium for Israel has dropped considerably over the past few years.
William Blair adds, “This increasingly stable environment, with greater than 5% GDP growth per year and low inflation, is a backdrop for one of the most exciting markets for technology in the world. Israel has earned a reputation as a world leader in technology innovation… We therefore view technology as Israel’s competitive differentiator relative to other emerging economies. Nearly half of Israel’s industrial exports are classified as high-tech, and more than 60 foreign companies have opened research centers in Israel... The result is that Israel has become, in our view, an important market for investors, particularly in the technology sector.”
William Blair is a strategic partner of Poalim Capital Markets - Investment Bank Ltd.
Published by Globes [online], Israel business news - www.globes.co.il - on April 19, 2007
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