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Special to The Jewish News
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sraeli companies doing
business abroad have al-
ways been constrained by
their lack of capital and the
stringent foreign current
restrictions placed on them by
the Bank of Israel.
Yet as the world's economy
becomes more global and
with Europe 1992 on the
horizon, if they are to survive
in the new game, Israeli firms
must become part of this
global industrial village.
A new firm on the financial
scene in Tel Aviv believes it
has the formula to help
Israeli firms do just that.
Tmura T.N. Ltd. is one of
Israel's few firms specializing
in corporate finance and
financial engineering for ex-
port, trade and joint venture
needs of Israeli industry.
With financing from Israel
General Bank, the four
founders of the firm include
Yoram Ziv, former president
of Israel Chemicals, Yishai
Erel, who previously headed
the international corporate
finance department at Israel
Chemicals, Boaz Misholi, one
of the founders of Efrat
Future Technologies, and
well-known business lawyer
Amnon Portugali.
Yishai Erel believes that
more than 100 Israeli firms
have the critical mass to play
in the big leagues of interna-
tional finance and enhance
their posture internationally
by making a smart cross-
border acquisition.
He points to Herzilia-based
Oshap Thchnologies, which
specializes in factory automa-
tion and whose shares are
traded publicly in New York,
as a good example of how a
properly structured Israeli
firm should look. From day
one the company acquired
Technomax in Belgium which
gave them critical mass in
terms of revenue, and enhanc-
ed their ability to raise future
funds abroad. Investors could
back the Belgium company,
rather than have to deal with
the political risk factor of in-
vesting in Israel.
Since Israel's banking
system is very asset-based,
rather than cash-flow based,
banks will lend money to any
company with assets, but not
necessarily to those with
healthy cash flows. This leads
many Israeli firms with a
solid future growth and ex-
pansion strategy to believe
they are not in a position to
finance a foreign acquisition
to enhance their interna-
tional marketing position.
"They wrongly assume that
these types of cross-border ac-
quisitions are out of reach as
they believe they will have to
finance the full cost of the
purchase price when in fact
the deal can be done with as
little as 25 percent," says
Erel. "The rest can be ac-
quired via international
banks' Mergers and Acquisi-
tions departments. Unlike
Israeli banks, assets and cash
flow of the acquired entity
has value to these investment
firms."
Tmura will first identify a
possible takeover target, ap-
proach M&A departments in
large international banks,
and then fit these two
parameters to the needs and
growth strategy of the Israeli
firm. Then it will price and
evaluate the foreign firm
before recommending it to the
Israeli client.
There is also the problem
for Israeli firms of a sur-
charge of 7.5 percent on funds
raised abroad if brought back
to Israel and then later used
to acquire a foreign firm. If
the funds are raised abroad
and kept there, no surcharge
is levied.
Another example is if a
company raises money via a
loan from abroad. It must pay
7.5 percent as a surcharge to
the Bank of Israel which
refunds the money when the
loan is repaid. In the mean-
time the firm loses a portion
of its operating capital.
"The Bank of Israel needs
to enter the 1990s," says Erel.
"Israel's tax system is too
slow to keep up the pace of
change in developments on
the international business
scene. 1b establish joint ven-
tures abroad, firms need more
flexibility to transfer their
capital and funds freely,
across as many borders as
they like. How will Israeli
companies be able to compete
in the future with firms from
countries which have more
liberal financial restric-
tions?"
Erel also contends that the
world of Mergers and Acquisi-
tions is a two-way street. If
more Israeli companies
played the game, when the
Israeli government decides to
sell the companies it owns it
will be easier to enlist these
same banks because they will
realize the political risk fac-
tor associated with doing
business with Israel is not a
potential barrier.