Reports have been circulating throughout the Israeli press, that AOL (NYSE:TWX) is set to buy Israeli start-up Quigo, for $300 million. Quigo's AdSonar competes with Google's AdSense (NASDAQ:GOOG), placing links on search results, while its FeedPoint product serves up ads on search results or Internet sites, relating the ads to the user's interests. This technology is revolutionizing online advertising as advertisers can really start targeting appropriate consumers, and maximize their advertising budgets.

Many Israeli analysts believe that this deal may open up the door for further M&A with Israeli companies. In 2007 over $20 billion was invested in Israel, including HP's(NYSE:HPQ) $4.4 billion purchase of Mercury Software. So far 2008 has been slower, but this deal may just be what the doctor ordered. Many Israeli companies have been mentioned recently as potential takeover targets. Companies like alternative energy innovator Ormat(NYSE:ORA), supply-chain operator Retalix (NASDAQ:RTLX) are just a few worth mentioning.

Disclosure: Writer holds a position in ORA and RTLX. He has no other position in any stock mentioned as of 11/4/07.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com.