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Technology M&A and Israel
April 5, 2006
TECHNOLOGY
BANKIN G
GROUP
TECHNOLOGY
BANKIN G
GROUP
TECHNOLOGY
BANKIN G
GROUP
2
Technology M&A is Back!
Strategic acquirors have underinvested
Economic environment has stabilized
Financial buyers more active
BuyersBuyers SellersSellers
VC funding robust
IPO prospects still challenging
Increased M&A Activity
3
Venture Capital Investment Activity Has Stabilized
US Technology Venture InvestmentUS Technology Venture Investment Capital Raised by SectorCapital Raised by Sector
Source: VentureSource.
28.5%33.4% 30.6% 30.2% 28.1% 29.2% 28.8%
33.2%
35.0%30.1%
25.4%
18.7% 15.1% 16.6%
14.1%
13.5%21.5% 29.8%
35.6%35.2% 35.4%
4.5%
5.3% 8.7%8.0% 10.4%
9.8% 9.3%3.3%
3.3%5.2%
5.9% 5.9%7.5% 6.4%19.9%
13.1%6.5% 3.1% 3.4% 4.9% 6.3%
0%
25%
50%
75%
100%
1999 2000 2001 2002 2003 2004 2005
($M)
Software Communications Healthcare
Semiconductors Electronics Information Services
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
1999 2000 2001 2002 2003 2004 2005
($M)
Software Communications Semiconductors
Information Services Electronics Healthcare
4
Key Technology M&A Themes
ConsolidationConsolidation Financial BuyoutsFinancial Buyouts
For Sale by ProspectusFor Sale by Prospectus Technology Time to MarketTechnology Time to Market
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M&A Continues to be the Most Likely Exit
Total US Technology IPO ActivityTotal US Technology IPO Activity
Total US Technology M&A ActivityTotal US Technology M&A Activity
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
2000 2001 2002 2003 2004 2005
Tota
l Vol
ume
($M
)
-
30
60
90
120
150
180
210
240
Num
ber of Transactions
Total Volume ($M) Number of Transactions
Source: SDC.
$0$100,000
$200,000$300,000$400,000$500,000
$600,000$700,000
2000 2001 2002 2003 2004 2005
Tota
l Vol
ume
($M
)
-600
1,2001,8002,4003,000
3,6004,200
Num
ber of Transactions
Total Volume ($M) Number of Transactions
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“It’s no exaggeration to say that the kind of innovation going on inIsrael is critical to the future of the technology business”
Bill Gates – Microsoft
“Israel is important to our goal because it has historically been a hotbed of new raw technology and scientific developments”
Mathew Growney – Motorola Ventures
“[The Israelis] have a strong tradition of innovation in engineeringand a strong technical tradition”
Ned Hooper – Cisco
“There are few places like Israel where one can find leadingtechnologies in almost every field”
Y. Hasson – Senior Vice President Nokia Venture Partners
“Hey Kevin, Israel is hot, You gotta sponsor this breakfast”
Gil Livnah
Israel Plays a Key Role in the Global Tech Market
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Why is Israel a Hotbed of Technology
Government Support for R&D
Culture
Flourishing IPO and M&A Activities
Highly Skilled Workforce Favorable
Government Policy
Well Represented
Venture Community
Entrepreneurial Culture
Local R&D Centers of
Leading Global Companies
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Israeli VCs are Raising Capital Again Post Bubble
Total Net Venture Capital RaisedTotal Net Venture Capital Raised Largest Israeli Venture Capital Funds*Largest Israeli Venture Capital Funds*
Rank Management CompanyCapital Managed
1992 - 2005Capital Raised
2000 - 2005
1 Pitango 945$ 800$ 2 Gemini 546 400 3 Genesis 523 434 4 Star 494 206 5 Benchmark Israel 490 490 6 JVP 481 225 7 Giza 466 361 8 Evergreen 422 213 9 Vertex 416 330
10 Sequoia Israel 380 350 11 Carmel 373 373 12 Israel Seed 262 204 13 Concord 260 185 14 Cedar 225 175 15 Israel Healthcare 210 210 16 Challenge - Etgar 201 120 17 Walden Israel 184 90 18 Formula Ventures 170 83 19 Infinity 165 81
BRM 150 150 Tamir Fishman 150 150 Medica 150 135 Yozma 150 50 Total 7,813$ 5,815$
20
Source: IVC Research Center*Ranked by capital raised 1992-2005
$299
$580 $608
$1,354
$4,102
$1,341
($119)
$15
$727
$1,198
($500)
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
($M
)
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Israeli Companies Continue to Raise Capital for Growth
Capital Raised by Israeli CompaniesCapital Raised by Israeli Companies Capital Raised by SectorCapital Raised by Sector
Source: IVC Research Center
14% 16%20% 18% 19% 22%
17%
29%
40%
42%37% 33% 29%
35%
13%
8%
16%
15% 18% 22% 21%
33%
30%9%
4% 4%4% 3%
2%
3%
4%
12% 11%10% 12%
9%4%
9%14% 15% 13% 12%
0%
25%
50%
75%
100%
1999 2000 2001 2002 2003 2004 2005
($M)
Software Communications Life Sciences Internet Semiconductors Other
$577
$1,822
$1,174
$657 $590$800
$682
$436
$1,270
$812
$481$421
$665$655
$0
$650
$1,300
$1,950
$2,600
$3,250
1999 2000 2001 2002 2003 2004 2005
($M)
Foreign and other investors Israeli VCs
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Leading Companies Also Have Invested in Israel
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NASDAQ21.1%
Other15.8%
AIM42.1%
TASE21.1%
This Healthy Climate Results in Capital Market Opportunities
Israeli Technology IPO Activity Israeli Technology IPO Activity 2005 Israeli IPO Activity By Exchange2005 Israeli IPO Activity By Exchange
Source: IVC Research Center
$-
$175
$350
$525
$700
$875
$1,050
$1,225
$1,400
$1,575
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 YTD2006
Volu
me
($M
)
0
5
10
15
20
25
30
35
40
45
# of Deals
Total Volume # of Deals
12
And M&A Activity is Coming Back Strong
Israeli Technology M&A ActivityIsraeli Technology M&A Activity
Source: IVC Research Center
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 YTD2006
Volu
me
($M
)
0
8
16
24
32
40
48
56
64
72
# of Deals
Total Volume # of Deals
Hot Israeli Company
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Israeli M&A Activity Continues to Focus on Tech Infrastructure
Source: Factset*Does not include US issuers.
SecuritySecurity IT AutomationIT Automation CommunicationCommunication
SemiconductorSemiconductor InternetInternet
NetApp / Decru
Verisign / SnapCentric
RSA / Cyota
Radware / Vsecure
BMC / Identify
Sun / Aduva
Cisco / Sheer Networks
Juniper / Kagoor
Alcatel / Native Networks
Cisco / P-Cube
Broadcom / Siliquent
Zoran / Oren Semi
Intel / Oplus
Agere / Modem ART
eBay / Shopping.com
Boston Comm / PureSight
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TECHNOLOGY
BANKIN G
GROUP
TECHNOLOGY
BANKIN G
GROUP
TECHNOLOGY
BANKIN G
GROUP