Israel’s politics may be a mess, but the economy remains surprisingly strong.
by Duncan Currie, WEEKLY STANDARD
LAST MAY, just two months before Israel found itself embroiled in a war with Hezbollah, the world’s most successful investor, Warren Buffett, purchased an 80 percent share in Iscar Metalworking, an Israeli toolmaker, for some $4 billion. Prior to closing the deal, Buffett had never visited the Iscar headquarters. Nor had he ever visited Israel. But that didn’t deter him. “We are investing $4 billion in an amazing band of people from Israel,” he told an Israeli financial newspaper. “If your readers know a company that resembles Iscar, even a little, have them call me immediately. I want to buy. Let them call me collect.”
Then in late July, as war raged in Lebanon and Hezbollah rained rockets down on northern Israel, the Silicon Valley giant SanDisk, which purports to be “the world’s largest supplier of flash memory data storage products,” announced its purchase of an Israeli company for stock then valued at nearly $1.6 billion. Just a few days earlier, Hewlett-Packard had publicized its agreement to buy out the scandal-plagued firm Mercury Interactive for roughly $4.5 billion. In November HP announced that the former Mercury office in Yehud, Israel, would become its biggest research and development center in the world.
The SanDisk and HP deals were hardly anomalies. Despite war and domestic political turmoil, 2006 proved a banner year for Israel’s high-tech boom. Consider the numbers on merger and acquisition activity. According to the Israel Venture Capital Research Center, “M&A activity involving Israeli companies that were either acquired or merged totaled $10.58 billion in 2006 in 76 deals. The total dollar volume was significantly higher than in previous years and was a third of the $35.8 billion for Israeli high-tech M&A deals since 2000.” The IVC Research Center also reports that “in 2006, 20 Israeli companies raised $693 million through initial public offerings on U.S., European, Asian, and Israeli stock exchanges. CONTINUE