The Impact Of Covid-19 On Israel's Economy And Legal System

• Published date: 18 January 2021
• Subject Matter: Corporate/Commercial Law, Coronavirus (COVID-19), Corporate and Company Law, Operational Impacts and Strategy
• Law Firm: Yigal Arnon & Co
• Author: Mr Simon A. Weintraub and Nimrod Vromen

Notwithstanding the global COVID pandemic and economic recession, 2020 is proving to be a record-breaking year for Israeli technology start-up companies.

INTRODUCTION

While the current state of the Israeli economy may or may not be wanting in divine intervention, there is still no lack of silver linings protruding from behind the ominous Covid-19 storm clouds. This article will look at how the Israeli economy has faired during the rage of Covid-19 including its impact on business as well as the legal system during the first three financial quarters of 2020. Notwithstanding the global COVID pandemic, 2020 is proving to be a record-breaking year for Israeli technology start-up companies. While in North America high tech investment is down 10% compared with 2019 and while in Europe we have seen a 20% reduction, in Israel there seems to be a 40% increase compared to the first half of 2019. The above data is hard to extrapolate but what does seem evident is that Israel including Israeli policy makers, are working very hard to stimulate the economy in the midst of this unprecedented international recession.

HIGH TECH INVESTMENT

Workforces are transitioning (albeit not always by their own choosing) to telecommuting and in the process saving on office related expenses, namely rent. And while consumer demand is down, the need for innovation is up. There are opportunities to identify companies that have abnormal growth potential that are not seen during "normal" times. Companies like Zoom and Monday.com are helping employees make a smooth transition to domestic work environments. People are staying at home streaming content at rates never seen before. People are ordering online instead of going to the mall. Workouts are at home and not at the gym. The world is being forced to change its habits, and the hi-tech industry is providing it with all the tools it needs to implement such change.

The average exit value in Israel has increased by 14% compared to the first half of a Covid-19 free 2019. These exits in 2020 included major deals that took place during the peak of worldwide lockdowns, like Intel's acquisition of Moovit for approximately US$900M (in which our firm, Yigal Arnon & Co., represented Intel). These rosy numbers are arguably a bit misleading, given that US$3.25B (62%) of the US$5.24B in exits in H1 2020 were deals that were rooted in pre-Covid-19 times. This means that only 38% of the exits had their roots during the crisis.

Investments on the other hand...