International Flavors & Fragrances Inc. has around 13,000 employers worldwide, servicing about 30,000 customers. It develops and produces flavor and fragrance essences and raw materials, which it supplies to the food, beverages, personal care, and household products industries.

So why has IFF poured US$7.1 billion into purchasing Frutarom, located in Haifa with 400 workers and a customer base of 1,000? And it is worth noting that this one of the largest acquisitions in Israel’s history.

The online interview with IFF chairman and CEO Andreas Fibig is very revealing and bare lessons for other multinationals. He makes the following points.

Fibig says that the acquired activity in Israel enables him to be exposed to many aspects of the economy and industry in Israel. “One aspect concerns the very good agritech and biotech sectors that exist here, which can help us in areas of innovation.”

Fibig noted that Frutarom’s excellent tech capability can now be exposed to a much larger customer base.

And when it came to investor relations, Fibig did not hold back.

…we now have good Israeli investors, and we really want to nurture our base of investors here. We also saw that it doesn’t require too much effort on our part to be listed in Israel, too, in addition to trading in our share in New York. It’s also not too expensive, and that’s another reason why we said that we’d leave the share here.
We also want to increase the share of the Israeli investors in the company, because there’s a good base here of money and good financing, and we can work with it.

And then Fibig touched on the core of the start up nation’s raison d’etre, entrepreneurship and innovation.

Frutarorm dared to enter additional areas of interest to us, such as active cosmetics, food protection, natural colors, and healthy ingredients, which had stronger dynamic growth than what we had achieved. Through the acquisition, we obtained exposure to complementary and growing fields of business.

For decades, geopolitical considerations have restricted Israel’s ability to attract overseas investment. In an MIT review earlier this month, Matthew Kalman noted that

More than 300 global technology companies operate in this tiny Mediterranean country—most of them within an hour’s drive of Tel Aviv. A trickle first led by IBM, Intel, Microsoft, Motorola, and Cisco has become a flood of marquee brands: at least 117 companies from 21 countries have opened Israeli R&D centers since 2014, hoping to capture some of the magic in the country’s bubbling ecosystem of more than 6,000 startups.

The IFF – Frutarom case study sums up this lightening change in Middle East commerce. Who’s next?