Altshuler Shaham Deal Sparks M&A Wave Across Israeli Investment Houses
The sale of Altshuler Shaham has triggered a wave of potential mergers and acquisitions among Israel's veteran investment houses, as firms like Yelin Lapidot and More weigh strategic deals.
The massive deal for the sale of control in Altshuler Shaham to WeSure and Yair Lewinsohn may turn out to be less the end of an era and more the opening shot for a round of major deals in the financial sector. Ever since the deal was signed, significant players have been re-evaluating acquisitions and mergers to position themselves at the forefront at the expense of competitors or former players.
At the center are primarily veteran investment houses where founders still hold control and key management positions. The assumption in the industry is that for them, Altshuler Shaham provided a reminder that it is almost impossible to choose the optimal exit point. Just about five years ago, Altshuler Shaham's provident fund company was the largest in Israel, trading at a valuation of ₪4.4 billion. Now it has been sold at a valuation of ₪1.8 billion following years of weak returns and the departure of its dominant investment management figures.
The Challenge of Distribution Channels
One of the main names on the shelf is Yelin Lapidot. According to several independent sources, the owners of the investment house, Eyal Lapidot and Dov Yelin, one of the veterans in the industry, are open to considering a deal. The valuation aimed for by Lapidot and Yelin is ₪3 billion, plus the cash in Yelin Lapidot's treasury (equity and cash), which stands at ₪300 million, bringing the total to ₪3.3 billion. This requested valuation is 65% higher than the traded value of the investment house.
At the same time, Yelin Lapidot has been dealing with a significant increase in redemptions in its provident funds. In August, negative transfers reached a peak of ₪2.2 billion in a single month. Since May of last year, clients have withdrawn a cumulative amount of ₪18 billion from Yelin Lapidot, putting the firm on the verge of a crisis similar to the one experienced by Altshuler Shaham.
IBI's Missing Long-Term Savings Arm
In recent years, IBI Investment House has become one of the largest entities in the capital market, with significant activity in mutual funds, brokerage, and financial services. However, one central pillar has been missing: long-term savings. IBI gave up its provident fund activity in the previous decade, but the massive growth of the provident and training fund market has highlighted how crucial long-term savings are.
Recently, IBI also explored a merger with Altshuler Shaham, but Gilad Altshuler sought an exit that would allow him to leave the provident and pension activity entirely, giving preference to the WeSure deal. Experts note that with Yelin Lapidot, a different structure might work, where the founders remain in their roles and preserve the brand.
More Investment Houses Exploring Moves
More Investment House is largely the mirror image of Altshuler Shaham and Yelin Lapidot. In recent years, More has been on the gathering side, and its provident fund company has grown rapidly to become the second largest in the industry. According to market sources, More is exploring the possibility of merging with another mid-sized investment house to become the largest in the sector.
The Altshuler Shaham deal may therefore prove to be less the end of an era and more the starting gun for a wave of mergers and acquisitions in the industry, as players realize the power of consolidation.
