Citigroup Inc (C) Projects Israel Growth on Tech Mergers and Acquisitions

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Citigroup Inc (NYSE:C) Israel projects growth driven by mergers and acquisitions in the Israeli technology industry. According to Citigroup Israel CEO Neil Corney, the country’s high tech industry has an active scene of mergers and acquisitions, with tech giants such as Google Inc (NASDAQ:GOOGL) and Cisco Systems, Inc. (NASDAQ:CSCO) doing a shopping spree for Israeli start-ups and tech companies. “We expect to see strong deal flow in that area, whether it’s foreign companies buying local startups or IPOs of high-tech Israeli companies abroad.” Corney said in an interview with Bloomberg at Tel Aviv.

The technological innovation in Israel, which could be attributed to its focus on developing defense capabilities, have attracted the attention of the world’s leading tech giants. Former Microsoft Corporation (NASDAQ:MSFT) CEO Steve Ballmer once remarked that “Israel is a start-up center, and there is always something to challenge us there, or one that we can acquire.” Just last year, in November,  under the leadership of its new CEO Satya Nadella, Microsoft acquired Israeli cloud-security company Araoto Ltd. for an undisclosed amount, although The Wall Street Journal estimates the amount to be $200 million.  According to Corney, even as Citigroup Inc (NYSE:C) laid off workers from other regions around the world, the bank has to hire additional staff for its operations in Israel on account of the country’s economic growth, which is pegged by Bloomberg data to grow at 3.1 percent this year, higher than the global growth rate of 2.8 percent.

citigroup logoThe past year have seen 18 IPO’s and the sale of 52 companies, with the amount estimated to be at $15 billion, according to a report by PricewaterhouseCoopers LLP, as quoted by Bloomberg. That is almost double the figure of $7.6 billion recorded for 2013. CNN reports that for 2012, acquisitions in Israel raised about $4 billion, although Zack Weisfeld of Microsoft Israel estimated an amount of $13 billion in acquisition costs for that year, taking into account that most deals are being kept private, as is the case with Araoto Ltd.’s acquisition by Microsoft. Taking advantage of this growth scenario, Citigroup Inc (NYSE:C), which started its Israeli operations way back in 1996, is continuing its investments in the areas of corporate finance, investment banking, and project finance.

Israeli institutions also have the capacity to invest abroad. A Bank of Israel data, cited by Bloomberg, indicates that institutional investors have managed up to 1.3 trillion shekels of assets as of September last year. “This business has grown considerably already, but we still see huge potential in the years to come,” according to Corney.

Another growth area in Israel cited by Citigroup Inc (NYSE:C) is in the energy sector, particularly with the discovery of Leviathan and Tamar gas fields off Haifa in northern Israel four years ago, although industry analysts complain that the sector has fallen prey to hostile regulatory environments, as well as strains from the country’s politicians and businesses. Corney indicated that international investors prefer a clear regulatory environment, and according to him, “They are watching developments in Israel very closely.”

This article has been written by Nonito Guntan.

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