With mergers and acquisitions activity on the uptick, the familiar question of “Who is next?” is being asked. The answer may just be Israeli drugmaker Teva Pharmaceuticals (NasdaqGM: TEVA).

Shares of Teva, the world’s largest maker of generic drugs, surged nearly 10% last week to highest levels in over four years. Volume was 62% above usual as deal-making in the health care sector, namely the $25 billion bid for Forest Laboratories (NYSE: FRX) by generic drugmaker Actavis (NYSE: ACT) stoked speculation Teva could be a takeover target. [A Fantastic Day for Pharma ETFs]

“Speculation is mounting that other drug companies will follow Actavis because they need to make acquisitions to grow and because Teva’s valuation is attractive,” Bloomberg reported, citing Jason Kolbert, a biotechnology analyst at Maxim. Teva trades at a 42% discount to the average global generic drug maker, according to Bloomberg, perhaps making an even more attractive target.

A Teva takeover would be very good news for the iShares MSCI Israel Capped ETF (NYSEArca: EIS) because, simply put, EIS is Teva-heavy. The stock accounts for 27.7% of the ETF’s weight, nearly triple the allocation given to the oldest Israel ETF’s second-largest holding, according to iShares data.

News of a possible acquisition of Teva comes as EIS is facing increased competition from the Market Vectors Israel ETF (NYSEArca: ISRA). EIS is up about 3% this year, but ISRA is up nearly 4%. Although ISRA is not even 10 months old, the ETF has gained a following among investors looking for exposure to Israel because it has ample exposure to the country’s booming technology sector, itself rife with potential takeover targets. [Startup Scene Could be a Boon for Israel ETFs]

ISRA has plenty of exposure to Teva with a 13.6% allocation, but that pales in comparison to the Teva weight offered by EIS.

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