Israeli private equity thrives with $1.67 billion in capital

In the first half of 2015, 44 deals totaled $2.1 billion, according to the latest IVC-Shibolet report.


Private equity investment in Israeli companies climbed to record in the second quarter of 2015 according to the latest report by IVC Research Center and Shibolet & Co..

key facts :

  • Israeli private equity peaked with 29 deals
  • Foreign PE investments continued to lead with 78% share
  • High-tech industry attracted $1.4 billion, or 81% share, of total investments

IVC Research Center says that Israeli private equity performance reached a quarterly record, with 29 deals amounting to $1.67 billion in capital. The quarter ended with the largest number of Israeli PE deals in comparison to the 5-year quarterly average of 17 deals. The quarterly amount invested in PE deals was the highest in three years, far above the $145 million and the $385 million invested in First and second quarters of 2015, respectively.

In first half  2015, 44 PE deals totaled $2.1 billion – the strongest first half-year since 2011, quadrupling first half 2014’s $592 million invested in 44 deals. The average private equity deal reached $46.8 million in first half 2015, compared to $13.5 in first half 2014.

In first half 2015, Israeli private equity fund investments accounted for $447 million, or 22 percent, of total investments. This compares with $355 million (60 percent) invested in first half 2014 and $208 million (23 percent) in first half 2013. The largest deal by an Israel PE fund was the $97 million buyout of paper manufacturer Hadera Paper by FIMI in second quarter 2015.

The bulk of PE investments were made by foreign PE funds, which have dramatically increased their activity in Israel in second quarter 2015 with $1.3 billion, capturing 78 percent of all investments. The amount was only marginally lower than the $1.4 billion (83 percent of total) invested in Third quarter 2014 – the strongest quarter for foreign PE fund activity to date. Moreover, in first half 2015 foreign PE fund investments accounted for 77 percent of all investments, compared to first half 2014, when they captured just 37 percent.

Foreign PE funds were responsible for the top four deals in 2015, exceeding $100 million each, together amounting to nearly $1.3 billion, or 62 percent, of total PE transactions in first half 2015. The buyout of Lumenis, a medical device company by XIO Group, a Chinese PE fund, amounted to $510 million, 30 percent of total PE deals in second quarter 2015. The buyout of ClickSoftware, an enterprise software company by Francisco Partners, a global private equity firm, followed closely, with $438 million. Two additional straight equity deals were under $200 million each: $175 million investment in Ormat by Northleaf, and $150 million invested in Infinidat by TPG Growth.

In second quarter 2015, 11 buyout transactions led all Israeli private equity deal-making with $1.3 billion, or 80 percent, of total investments. In comparison, straight equity deals dominated both in first half 2015 and second quarter 2014, with 89 percent and 59 percent of total dollar investments, respectively.

Omer Ben-Zvi, Partner at Shibolet & Co. observes a number of concurrent trends: “The last quarter manifests a continuous growth of the Israeli private equity industry, despite relatively low number of transactions in the previous two quarters. The year’s second quarter demonstrates the stability of the local market with two big buyouts alongside a larger number of medium sized deals.”

“In addition to the reinforcement of the Israeli PEs activity, we are also seeing a continuing trend of high-tech buyouts by foreign PE funds, further attesting the maturity of the local tech industry and its global integration. Foreign PE funds already active in Israel have been accelerating their deal making for some time now, and new PEs, including Chinese investors, are more and more active, ” noted Ben-Zvi.

Marianna Shapira, Research Manager at IVC Research Center, says “Israeli high-tech companies appealed to many private equity investors, leading with $1.4 billion in capital. We’ve observed this rapidly growing interest in local high-tech, as the sector’s share in PE investments grew constantly from quarter to quarter, starting in the end of 2013, and peaking at 81 percent of total investments in second quarter 2015. In comparison, the Israeli high-tech captured 78 percent and 54 percent in first half 2015 and second quarter 2014, respectively. While in both previous quarters technology deals led in share, with an upward trend, technology investments leaped from $80 million in second quarter 2014 when this trend first started, to current levels at multiples of nearly 18 times that amount. Judging from the current development trend in Israeli high-tech and our conversations with investors, PE funds suppose that Israeli technology sector offers various engagement opportunities.”

Omer Ben-Zvi believes this trend has not capped just yet: “From our perspective of the market, we expect these trends to continue or even increase in the near future, with a growing number of deals by foreign PE investors from the US, China and other countries. We believe such buyouts and PE investment in Israeli technology companies will play an important role in supporting and building the sustainable, stable companies we all wish to see growing in Israel, ” he concludes.

Software led all private equity transactions both in first half 2015 and first half 2014, with 33 percent and 23 percent of total dollar investments; life sciences stood out in first half 2015 with 28 percent, compared to just 9 percent in the same period of 2014. In terms of the number of PE deals, the services industry had an unusual number of deals: 11, mostly due to the new Israeli private equity fund active in the television field.


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