ISRAEL Law and Practice Contributed by: Barak Platt, Micki Shapira and Moshe Pasker, Arnon, Tadmor-Levy
The defence sector, historically a cornerstone of Israeli industry, showed renewed M&A momen - tum in 2024, driven by increased global defence spending and the need for advanced technologi - cal solutions. Water technology companies also experienced increased M&A interest, reflecting global concerns about water scarcity and Israel’s leadership in this field. 2. Overview of Regulatory Field 2.1 Acquiring a Company Three structures are commonly used to acquire Israeli companies and each has its own advan - tages and disadvantages. While tender offers are another potential structure which can be used to acquire all of the issued shares of a public com - pany, they are rarely used primarily because: • holders of at least 95% of the target compa - ny’s issued shares must accept the offer; and • appraisal rights continue for six months fol - lowing the closing. Share Purchase Agreements Many private Israeli companies are acquired using a share purchase agreement. These trans - actions are straightforward. The acquirer enters into the agreement with the target company and its shareholders who sell their shares in the target company directly to the acquirer. There are meaningful advantages to this structure, for example: • only capital gains tax is payable and foreign shareholders are often exempt from capital gains taxes in Israel; • the target company’s legal entity remains the same; and
• if the circumstances permit, the agreement can provide for a simultaneous sign and close. However, share purchase agreements are not used for all acquisitions of private Israeli com - panies. This structure is appropriate for trans - actions in which shareholders holding 100% of the target company’s share capital or very close to 100%, co-operate in the transaction and sign the share purchase agreement. While the Israeli Companies Law provides for a statu - tory squeeze-out mechanism, as do the charter documents of many private Israeli companies, the language of the Israeli Companies Law is unclear, and there is no case law in Israel to provide guidance. Accordingly, if there is seri - ous doubt as to the target company’s ability to obtain the approval of all, or substantially all, of its shareholders, acquirers will typically opt for a different structure. Mergers The Israeli Companies Law provides the legal framework for mergers, which must be between two Israeli companies. Foreign buyers looking to buy Israeli companies will accordingly need to create an Israeli subsidiary and structure the transaction as a reverse triangular merger. This is the structure used in nearly all acquisitions of Israeli public companies, and of private compa - nies when the circumstances do not allow for a share purchase agreement. The provisions governing mergers in Israel are clearly set out in the Israeli Companies Law. In order to effect the merger, consent is required from the target company’s board of directors, as well as the holders of a majority of each issued class of shares. If these consents are obtained, no court approval is required and it is important
926 CHAMBERS.COM
Powered by FlippingBook