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Israeli private equity: Only $316 million invested in first quarter 2017

Number of Israeli private equity deals grew in first quarter 2017 – 26% year-on-year; 64% of capital proceeds 2017 came from 6 deals.

Key facts:

  • Number of Israeli private equity deals grew in first quarter 2017 – 26% year-on-year
  • 64% of capital proceeds in first quarter 2017 came from 6 deals ranging between $25M and $50M
  • Israeli funds led PE capital investments in first quarter 2017, just 3% below two-year average

In first quarter 2017, 24 private equity transactions performed by Israeli and foreign private equity funds accounted for $316 million, 45 percent down from the $578 million invested in Q4/2016, but 22 percent above the $260 million invested in first quarter 2016. The number of deals was up 33 percent from 18 in Q4/2016, and 26 percent above 19 transactions recorded in first quarter 2016.

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On further analysis, the IVC Research Center-Shibolet survey found that no large private equity deals (above $50 million) were performed in first quarter 2017, while in the past two years, several such deals were performed each quarter. Nevertheless, the quarter demonstrated dynamic activity by PE funds, as the number of deals was almost equal to the quarterly average of 23 transactions in two previous years. The six largest deals in first quarter 2017 were above $25 million each, attracting $201 million, or 64 percent, of total capital proceeds.

According to Omer Ben-Zvi, Partner at Shibolet & Co.: “The number of PE deals, specifically in the tech sector in first quarter 2017, seems to reflect a healthy PE local market. Indeed, the quarterly dollar amount scope is relatively low, but that factor tends to be highly influenced by one or two big deals, which we haven’t seen this quarter. According to our data, we do expect to see those kinds of deals in the next quarter.

Considering the fact that PE secondary buyouts have become one of the most prominent exit routes globally, and that new records have recently been broken by the growing Israeli tech industry, we believe that last quarter’s figures should not be considered as indicative of a slowdown in Israeli PE industry.” explains Ben-Zvi.

In first quarter 2017, Israeli private equity funds led capital investments with $226 million or 72 percent of total capital, an upsurge of 105 percent from the $110 million they invested in first quarter 2016, the lowest quarter for Israeli PE funds in the preceding two years. Moreover, the first quarter 2017 amount was only 3 percent below the $234 million quarterly average of the previous two years. The most prominent deal in first quarter 2017 was the $50 million buyout of Ace Auto Depot by Kedma. AMI Opportunities followed with the buyout of 83% of the controlling interest in Ten Petroleum for $38 million.

Foreign PE funds invested a mere $89 million, or 32 percent, of total capital proceeds in first quarter 2017, 41 percent down from first quarter 2016’s $150 million (58 percent). This was the second lowest quarter since Q3/2015’s $83 million (29 percent), which was the lowest in three past years at the time, and an entire 86 percent below the $615 million quarterly average of the two preceding years. Yet foreign PE funds’ activity grew significantly in first quarter 2017, both in terms of the number of actively involved funds (13) and number of transactions (12), compared to seven and eight foreign funds, which invested in six and nine PE transactions in Q4/2016 and first quarter 2016, respectively. The decrease in capital proceeds may have stemmed from their strict involvement in straight equity deals in first quarter 2017, which tend to involve smaller amounts. The largest investment in first quarter 2017 was performed by LS Health Science Partners – a $30 million deal in Active Implants.

Marianna Shapira, Research Manager at IVC, elaborates and adds: “As observed, in the beginning of 2017, PE fund activity returned to its average levels in terms of deal numbers and the number of active funds. The increase in the number of active PE funds – in combination with the 15 percent increase in the number of their high-tech investments and compared to the previous two-year quarterly averages – suggests that they view Israeli high-tech market as a valuable business opportunity, and may be diversifying risk by investing lower amounts directly in more potentially profitable companies”.

In first quarter 2017, the capital proceeds were split equally (50/50) between straight equity transactions and buyout deals, similar to Q4/2016 and first quarter 2016. The number of straight equity deals, however – which was the highest since Q3/2015, reaching 18 deals – was slightly above the quarterly average of the previous two years – 16 deals. The largest straight equity deal was the $30 million investment in Active Implants by LS Health Science Partners, a foreign PE fund, while the largest buyout transaction was the $50 million Kedma’s purchase of Ace Auto Depot.
Currently, there are 39 active Israeli private equity management companies monitored by IVC Research Center, with a total of $12.12 billion under management, and an estimated $1.2 billion available for new investments. In 2017 so far, one Israeli private equity fund closed capital – Sky Private Equity III, which raised $200 million; four more funds are in the process of raising capital.




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