Firms Court Emerging Israeli Tech Companies

Emmett Berg

For a growing number of California firms with expertise in technology deals, Israel has become a popular venue for business.

"The Israeli tech sector is more resilient than in the U.S.," says Steven Khadavi, a New York partner at Dorsey & Whitney, which in May launched an Israel practice group with lawyers in five cities, including Palo Alto. Other firms making similar moves include Nixon Peabody, which in November hired two partners from Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, to lead a cross-disciplinary Israel business practice; and Perkins Coie, which formalized the structure of its specialty practice for Israel in January 2008.

Buddy Arnheim, a partner at Perkins Coie's Menlo Park offices, recalls that "[a]fter a visit to Israel in 2007, I was deluged with emails from colleagues." Noticing the lack of coordination among the firm's resources, "we created a group because we realized we had a serendipitous mixture of expertise and historical relationships."

Israel, being both poor in natural resources and beset by episodic violence, has a strong interest in incubating renewable-energy and defense companies. Israeli innovation in these and other sectors has long been helped by the influx of scientists from the former Soviet Union, as well as by the national requirement for universal military service. Most of all, lawyers say, Israeli entrepreneurs proceed with business as usual even in times of calamity. "Israel's emerging technology industries are succeeding partly because no matter what the political situation is, terrorists cannot bomb intellectual property," says Bruce Mann, the San Francisco?based partner who leads Morrison & Foerster's ten-year-old Israel practice group.

Though some American firms left Israel after the so-called First Intifada (the violent uprisings in the Palestinian territories from 1987 to 1993), "the local geopolitical situation in Israel has had much less impact [on business] than the overall global trends," says Nixon Peabody partner Mark Kass. (One exception may be foreign firms considering investing in local infrastructure projects, says Micha Danzig, a partner with Mintz Levin, which has more than 40 attorneys in its Israel practice group.)

Plus, Israeli firms "are not waiting around for the [IPO] market to come back and [instead] are considering strategic acquisitions," adds Mann. Consider the case of health-technology company MediGuide: St. Jude Medical bought it in December for $283 million, plus the assumption of debt, a price that exceeded the value that IPO underwriters had estimated for the Haifa-based company.

Mann, who represents MediGuide, is among the attorneys who predict a steady stream of new entities in Israel requiring legal services for years to come. Nevertheless, high barriers still exist for law firms with little to no track record there. He cautions: "Israelis are not attracted to law firms that come to Israel on the basis that it's the flavor du jour."

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