Tech sector buttresses falling value in Israeli M&A market

18 January 2018

The total worth of the Israeli merger and acquisition (M&A) market fell over the past year according to Big Four firm PwC, although deals in the nation’s tech sector continue to add value.

Despite a slight increase in the number of M&A deals in the Israeli market for 2017, up by 9% to 131, the average price of the deals saw its first decline in five years with a 38% drop to fall below pre-2015 levels at $142 million. As a consequence, the total market value suffered a 27% overall decrease to $12.2 billion as compared to $16.8 billion for the previous period.

Yet, although the figures examined by PwC exclude Intel’s $15.4 billion purchase of Mobileye (with transactions over $10 billion omitted for the purposes of statistical consistency), the Big Four accounting and consulting firm noted that the number of M&As valued at over $100 million had, in fact, increased – also contributing 45% of all deals closed by foreign investors – while those in the $400 million-$1billion bracket contributed 9% of the total to be up from a previous level of 5%.

M&A in Israel Technology sector

While the average price of all M&A deals declined, a separate report from PwC highlights the rising average value of deals originating from the tech sector, which have kept the overall market ticking over and contributed to the boost in transactions above the $100 million mark. Again discounting the mega-deals (here, those above $1 billion), the total value of the sector for 2017 topped $6 billion across just a handful of extra deals to record a 71% jump on the $3.6 billion of 2016, while the average price of the deals rocketed from $66 million to $101 million.

With the deals over $1 billion included (both Mobileye and Mitsubishi Tanabe’s purchase of NeuroDerm) the total figure for the technology-driven M&A sector in Israel (together with IPOs) jumps to an unprecedented $23.8 billion – greatly eclipsing the ($1 billion+-inclusive) $9.6 billion figure from the previous year, and standing at 135% above the comparative boom of 2015.IPO in Israel Technology sectorIn all, the proportion of deals above $100 million more than doubled in 2017, from 16% to 33% of the total number. The $50 million - $100 million segment also saw a slight increase from a 16% to a 19% share, while, year-on-year, the number of deals in the under $10 million and $10 million - $50 million brackets noticeably fell, by 55% to 38%, and 14% to 10% respectively (a combined drop from a nearly 70% market-share to less than 50%). Additionally, there were three deals closed in the $500 million - $1 billion range in 2017, after no such transactions last year.Public offerings and M&As in Isreal - 1While regulatory changes in China have had an impact, the overall decline in M&A value for the year, and the rising price trends in tech-sector sales, can both perhaps be attributable in part to a maturing of the markets. A number of transactions, including those concerning companies in the tech sector, have, as per reports, been held over for the beginning of this year – denting 2017 M&A figures but helping to increase their market value.

This steady approach may reflect a more general pattern. Yaron Weizenbluth, Hi-Tech Partner at PwC Israel, points to an evolution in the Israeli entrepreneurial sphere in recent years, stating in the report; “Previously local players set their sights on a quick exit, but this appears to have changed in 2017, reflecting more than anything a more mature mindset of the local technology firms.”

The report concludes; “This year gave us a sharper view of the processes and trends that have been unfolding in the Israeli tech industry. Experienced investors who are in it for the longer run, more mature and prudent entrepreneur who are willing to build and develop sustainable companies, and larger follow-on capital raises, turned 2017, and probably also the years to come, into a fertile bed for highly developed and vibrant exit market."

Public offerings and M&As in Isreal - 2

According to another M&A analysis in the Middle East, by Strategy& (PwC's strategy consultancy arm), the MENA telecom market is set to face a merger & acquisition wave as telco's continue consolidation and ramp-up their technology footprint.

EY launches advanced tool to assess trustworthiness of AI technology

12 April 2019

Global professional services firm Ernst & Young has announced the release of an advanced analytical tool to assess the trustworthiness of artificial intelligence.

Enabled by Microsoft Azure, the EY Trusted AI platform released by the global professional services firm Ernst & Young produces a technical score of an artificial intelligence system by leveraging advanced analytics to evaluate its technical design, measuring risk drivers including its “objective, underlying technologies, technical operating environment and level of autonomy compared with human oversight.”

Aimed at helping to resolve the issue of trust in technology, which the firm contends is the biggest barrier to wider AI adoption, the new tool’s risk scoring model is based on the ‘EY Trusted AI conceptual framework’ launched last year, which speaks to embedding trust mechanisms in an AI system at the earliest stages around the core pillars of ethics, social responsibility, accountability and explainability, and reliability.

“Trust must be a front-line consideration, rather than a box to check after an AI system goes live,” said Keith Strier, EY’s Global Advisory Leader for Artificial Intelligence. “Unlike traditional software, which can be fixed, tested and patched, if a neural network is trained on biased data, it may be impossible to fix, and the entire investment could be lost.”AI system overviewUsers of the new solution such as AI developers, executive sponsors, and risk professionals will be able to garner deeper insights into a given AI system to better identify and mitigate risks unique to artificial intelligence technology, with the platform score produced by the tool subject to a complex multiplier based on the impact on users – taking into account potential unintended consequences such as social and ethical implications.

According to the firm, it’s the first solution designed to help enterprises evaluate, monitor and quantify the impact and trustworthiness of AI, while an evaluation of governance and control maturity further serves to reduce residual risks and allow greater planning – helping to safeguard “products, brands, relationships and reputations” in the contemporary risk environment.

“If AI is to reach its full potential, we need a more granular view – the ability to predict conditions that amplify risks and then target mitigation strategies for risks that may undermine trust, while still considering traditional system risks such as reliability, performance and security,” said EY Global Trusted Artificial Intelligence Advisory Leader Cathy Cobey.

Offered as a standalone or managed service – which will be regularly updated with new AI risk metrics, measurement techniques and monitoring tools – the new solution will be available to clients globally this year, with further features including a guided interactive, web-based interface and a function to drill down for additional detail, as well as the ability to perform dynamic risk forecasting on when an AI component changes – such as an agent’s functional capabilities or level of autonomy.