Israel: A Corporate/M&A Overview
Israel’s Economy in 2025: Renewed M&A Activity, AI-Led Exits and a Measured Outlook for 2026
The year 2025 marked a meaningful shift for Israel’s economy. Following a ceasefire and a gradual easing of hostilities, economic activity rebounded sharply, M&A volumes reached record levels and global interest in Israeli technology – particularly AI and cybersecurity – regained momentum. As Israel looks ahead to 2026, dealmakers are broadly optimistic, though geopolitical uncertainty continues to frame expectations.
A turning point for the Israeli economy
In many respects, 2025 may come to be seen as a watershed year. After two years of conflict, a ceasefire arrangement in the Gaza Strip led to a scaling back of military operations and the release of thousands of reservists, creating cautious expectations of greater stability in the near term. Against this backdrop, economic performance exceeded expectations. The shekel strengthened materially, the Tel Aviv Stock Exchange outperformed comparable markets and M&A activity gathered pace.
Unprecedented exit volumes and the Wiz–Google transaction
The scale of the rebound is reflected in PwC’s 2025 M&A report, which shows that exit values across M&A and IPOs rose by 340%, increasing from USD13.4 billion in 2024 to USD58.8 billion in 2025. A central driver was Google’s USD32 billion acquisition of Wiz, the largest transaction ever involving an Israeli-founded company. Importantly, even without this transaction, exit volumes in the Israeli M&A market doubled, a notable achievement given the prevailing geopolitical environment.
Geopolitical shifts, trade relationships and energy exports
Geopolitics has continued to influence Israel’s economic trajectory and is likely to remain a defining factor. While relationships with some long-standing partners have been tested, new trade opportunities have emerged. During 2025, Kazakhstan joined the Abraham Accords, Israel and India concluded a new bilateral investment agreement, and Israel entered into a landmark USD35 billion agreement with Egypt for the export of Israeli natural gas.
Technology strengths and early-stage AI exits
Despite regional uncertainty, Israel’s technology sector – together with its defence and defence-technology capabilities – continues to attract sustained interest from international acquirers. This is particularly evident in AI, where global corporates are under growing pressure to rapidly build advanced capabilities. One of the more striking features of Israel’s 2025 M&A data is the number of AI companies acquired at very early stages, sometimes within one or two years of formation, including Prompt Security, Axis and Figma. Deal activity also extended to companies operating at the intersection of AI, cybersecurity and defence, such as Carbyne, Armis and AIM Security.
Nvidia’s expansion and Israel’s AI ecosystem
Confidence in Israel’s long-term prospects was further reinforced in 2025 when Nvidia announced plans to establish a major campus in northern Israel and to double its local workforce to 10,000 employees. This investment builds on Israel’s established strengths in hardware supporting AI, alongside SaaS and cybersecurity companies operating further along the value chain, and underscores Israel’s position as an integrated AI innovation hub.
Gradual recovery in the public markets
Positive signals also emerged from the public markets. In 2025, Israeli companies began to return to US listings after several subdued years. IPOs by Via (smart mobility), eToro (trading) and Navan (travel technology) marked an important shift and suggested renewed investor appetite for Israeli issuers.
Tax and regulatory initiatives
As the year drew to a close, the Israeli Ministry of Finance and the Israeli Tax Authority announced a series of proposed reforms intended to support the technology sector. These initiatives reflect both the sector’s importance to the broader economy and a recognition of the challenges of recent years, including reduced foreign investment and the emigration of skilled talent. Proposed measures include incentives for investors in venture capital and hedge funds, increased certainty for multinational companies operating in Israel and tax exemptions for Israelis returning after periods abroad. Whether these proposals will be enacted, and on what timeline, remains unclear.
Looking ahead to 2026
Given the global integration of Israel’s economy, international trends often serve as a leading indicator, typically with a lag of six to twelve months. In that context, the robust global M&A environment seen in 2025 provides a constructive signal for Israel’s technology sector and the wider economy. Dealmakers therefore enter 2026 with cautious confidence, a sentiment echoed by a recent S&P credit upgrade and Goldman Sachs’ forecast of 5.4% GDP growth as part of what it described as a “big recovery”.
Nonetheless, risks remain. Any renewed escalation along Israel’s northern or southern borders, or involving Iran, could disrupt the recovery. Domestically, 2026 will also bring a national election – the first since the attacks of 7 October 2023 – against a politically charged backdrop.
In summary, Israel approaches 2026 with solid economic fundamentals, renewed transactional momentum and continued global interest in its technology sector, tempered by political uncertainty and regional instability. In this context, the opening lines of Charles Dickens’ A Tale of Two Cities feel particularly resonant: “it was the worst of times, it was the best of times”. Israel’s economy stands at a crossroads, and the direction it ultimately takes remains to be seen.