Cross-Border M&A in Tel Aviv: The Joint Venture Guide

Tel Aviv has become a focal point for global capital seeking innovation, talent, and access to fast-growing markets. Yet executing a cross-border M&A or forming a joint venture in Israel involves navigating multiple legal, regulatory, and cultural layers. This guide distills the essentials—backed by recent data and on-the-ground experience from Rofeh & Co., a leading Tel Aviv law firm for M&A and strategic commercial counsel.

Why Tel Aviv Remains a Magnet for Cross-Border Deals

According to the Israel Innovation Authority, foreign investment in Israeli tech exceeded $21 billion in 2024, with 38% of exits occurring through acquisitions by international buyers. Key drivers include:

• Deep tech ecosystem — over 7,000 active startups across cyber, AI, and life sciences.

• Supportive government incentives such as Innovation Grants and Reduced Corporate Tax for IP-based companies.

• Gateway to EMEA — Tel Aviv’s geographic and trade-agreement positioning enables quick access to European and Gulf markets.

Yet opportunity comes with complexity: foreign exchange controls, antitrust clearance, and sector-specific licensing (e.g., defense, fintech, cannabis) can delay or derail deals without localized expertise.

Regulatory Landscape Every Investor Should Know

1. Mergers Control

The Israeli Competition Authority (ICA) must approve transactions where:

• Combined parties’ turnover in Israel exceeds NIS 360 million, or

• One party has over 50% market share in any relevant sector.

Clearance usually takes 30–60 days, but early pre-filing consultation can cut timelines.

2. Foreign Investment Review (FIR)

Israel has no CFIUS-style regime, yet acquisitions in critical infrastructure, defense, and telecom require MoD or Ministry of Communications approvals. Proposed 2025 legislation may broaden FIR to cloud and AI—watch this space.

3. Tax Considerations

Israel offers a 0% withholding tax on dividends from “Preferred Technological Enterprises” and participation exemptions for certain share sales. However, non-resident sellers can face capital-gains tax unless treaty relief (e.g., US-Israel, UK-Israel) applies. Structuring with dual-resident holding companies often optimizes outcomes.

Step-by-Step Checklist for Seamless M&A Execution

1. Pre-deal scouting — conduct IP audits early; many Israeli startups use open-source code subject to restrictive licenses.

2. Term sheet alignment — define escrow, earn-out mechanics, and Israel-specific reps (e.g., Kibbutz land rights).

3. Regulatory filings — prepare ICA notification, Data Protection Authority consent for PII transfers, and Innovation Authority lien releases.

4. Employment integration — Israeli law mandates accrued vacation & severance transfers; consult on “Section 102” option rollover.

5. Closing mechanics — use Teudat Ishur (tax confirmation) to avoid purchaser withholding obligations.

6. Post-merger harmonization — implement bilingual HR policies and resolve IP registration in both Hebrew and English.

Structuring Profitable Joint Ventures in Israel

Joint ventures (JVs) offer a flexible path for international investors in Israel lacking on-the-ground scale. Typical vehicles include:

Structure	Pros	Watch-outs
Israeli Limited Company	Familiar governance, access to tax incentives	Public filings of shareholder info
LP (Limited Partnership)	Flow-through taxation	General partner unlimited liability
Contractual JV	Speed and flexibility	Enforceability of non-competes

Key Clauses to Nail Down

• Deadlock resolution — Israeli courts favor buy-sell mechanisms; Russian-roulette is enforceable if equitable.

• IP ownership vs. license-back — ensure inventions created in Israel are registered with the Patent Authority to secure R&D grants.

• Exit rights — drag-along thresholds above 75% are typical; tag-along is market-standard for minority foreign investors.

Case Studies: Lessons from Recent Transactions

A. US Semiconductor Giant Acquires Tel Aviv AI Start-up (2024)

Deal size: US $430 million. Rofeh & Co.’s role: lead Israeli counsel.Outcome: Obtained antitrust clearance in 32 days and renegotiated Innovation Authority royalty obligations, saving the buyer 6% of purchase price.

B. German Automotive Tier-1 Forms JV with Israeli Lidar Company (2023)

Deal value: €120 million equity and milestone funding.Key insight: Dual-class share structure enabled founders to retain 10× voting on R&D decisions while foreign partner secured veto on commercial licensing.

C. Singapore-Based Fund Exits Israeli Ag-Tech Portfolio (2022)

Strategy: Staggered secondary sale to strategic buyer to leverage participation exemption under Singapore-Israel tax treaty.Result: 0% Israeli capital-gains tax; regulatory approval completed within 45 days.

How Rofeh & Co. Adds Value at Each Stage

From preliminary scouting to post-closing integration, Rofeh & Co. provides strategic commercial counsel in Tel Avivthat aligns legal solutions with business objectives.

• Deal origination: Target identification through our venture capital network.

• Efficient diligence: Proprietary AI contract-review tools cut review cycles by 30%.

• Regulatory advocacy: Former regulators on staff facilitate constructive dialogue with the ICA and tax authorities.

• Dispute readiness: In-house litigators craft warranties that stand up in Israeli courts, reducing escrow claims.

• Long-term partnership: Ongoing corporate governance and compliance support post-deal.

Whether you are assessing your first acquisition or scaling an existing footprint, partnering with a seasoned Tel Aviv corporate law firm is your competitive edge.

Next Steps

To discuss your upcoming transaction or receive a tailored briefing on Israeli M&A developments, contact Rofeh & Co. Our cross-border team is ready to guide you from term sheet to successful integration.