The thought of investing in Europe might send many investors running for the hills, yet according to investment expert David Solomon, Europe is still a fruitful place to do business. And particularly for Israeli companies.
In fact, for smaller Israeli companies looking to raise modest amounts of equity, he believes now is an opportune time to look to European markets when they have, in the past, shied away from the region.
Veteran business consultant Mr Solomon (right) recently joined Israeli investment house Cukierman & Co as a senior partner. Cukierman is Israel’s leading investment house, facilitating over €3 billion worth of transactions since its inception close to two decades ago — a majority of them Europe-related.
“For smaller companies looking for small amounts of investment now is the right time to do business in Europe,” says Mr Solomon. “There is enough money there and enough opportunities to do it.”
His comments may come as a surprise to many, with the Eurozone crisis deepening and impending collapse of the euro having far-reaching implications. Recent figures showed the biggest slump in private sector business across Europe for nearly three years.
But Mr Solomon, who has consulted for dozens of high-profile companies including IBM, Bezeq and Bank Leumi, believes with crisis comes opportunity.
“We believe that the crisis in the Eurozone provides opportunities for small companies to raise money. Nobody wants to put money just on the Nasdaq or Alternative Investment Market (AIM). The crisis generates opportunity and there is a lot of opportunity now for smart companies in Europe.”
In addition, savvy investors are likely to be using the current turmoil to get educated about these markets and choosing companies that provide sound long-term opportunity.
Last year, European private equity firm Permira bought 61 per cent of Israeli drip irrigation company Netafim, established at Kibbutz Hatzerim in 1965, at a reported value of $900 million.
“For large developed Israeli companies Europe is still a large market,” says Mr Solomon. “Even now it is still attractive, more so than the US. Israel exports more to Europe than to the US. It is a bigger market.”
But it is not just large companies making the most of Europe. For younger Israeli companies that need to raise funds, the US has, in the past, proved more attractive but “something is changing” acknowledges Mr Solomon.
“The US has been the obvious place for Israeli start-ups: Israelis feel more comfortable with the US system than the European one; many of them have either studied or done business in the US whereas Europe feels a bit strange to Israelis, and the US is one entity whereas Europe is multi-national and multi-cultural and is harder for small businesses that don’t have the resources to penetrate or raise money in European countries.” What’s more, he says the business community in the US is more open to Israeli start-ups compared to the UK, which tends to focus more on local companies. “Therefore, Israel companies have historically not gone to Europe to do business. But the climate is changing.”
He identifies Germany and Switzerland as key markets for bio-technology; the UK for the internet and Russia for high-tech. “There is a lot of money in Russia and we feel that doors can be opened there.” He adds: “We see the UK as a very attractive place to start when trying to raise money and do business in both Europe and the Far East. It’s a gateway.”
But surely people are reluctant to invest in Europe given the current euro mess? He acknowledges: “From an export perspective, I believe it will take a longer time for Europe to recover. Larger companies will suffer because people have been spending trillions of dollars for nothing. There is debt and the population will pay; the standard of living will drop, damaging exports and larger companies. But this will not just happen in Europe. The impact will be global and we will have a few years of waves.”
Yet Cukierman, which hosts an annual Go4Europe conference — Israel’s leading Europe-Israel gathering — is actively helping Israeli companies do business in Europe.
Mr Solomon recently led a delegation of Israeli medical technology companies to the UK for an investment seminar, in association with the Israeli Embassy in London and Nabarro law firm.
“We are actively connecting Israeli companies to Europe, particularly London, Germany and Russia.” He is also optimistic about Poland and the Ukraine.
Mr Solomon, who divides his time between London, Tel Aviv and New York, is one of Israel’s leading businessmen in strategic and planning and firm valuation. He runs his own consultancy practice, DS Solomon Holdings, but joined Cukierman in May to head up their consulting activity.
He is the former director of Scitex’s Economic Department, and is the founder of investment bank, 4HIGHTECH, and Micromedic technologies, which is listed on the Tel Aviv Stock Exchange. He is the author of several books including From Seed to IPO and Business Planning in the Post Bubble Era.
“I want to bridge the gap between Israel and the UK, and between technology and finance.
“Everyone talks about collaboration but noone really carries it out. It is very tough to collaborate between early-stage companies, which really need it in order to come to market and generate critical mass. We are trying to do this.”