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IVC-GKH: Summary of Israeli Private Equity Deals - Q4 2012

Marianna Shapira, IVC Research Manager and Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co.


Summary of Israeli Private Equity Deals - 2012, IVC Reports: 2012 Israeli private equity transactions reach $2.6 billion

Key facts:

  • Q4/2012 PE deals at $557 million, up 105% from Q3/2012
  • 2012 average deal size at $56 million
  • Israeli PE funds accounted for 21% of PE investments in 2012
  • Software sector accounted for the largest share - 52% in 2012

Tel Aviv, Israel, March 19, 2013. In 2012, 46 Israeli private equity deals amounted to $2.6 billion, 10 percent below the $2.9 billion invested in 63 deals in 2011. The buyout of software firm Paradigm Geophysical by Apax Partners and JMI Equity for $1 billion accounted for 39 percent of total annual deal value. Average deal size in 2012 was $56.2 million, compared with $45.6 million in the previous year.

Israeli PE funds invested $530 million in 2012, accounting for 21 percent of total PE investments. This compares with $963 million or 33 percent invested by Israeli PE funds in 2011. The largest private equity deal by an Israeli fund was the $80 million buyout of Starhome, a mobile infrastructure company, by Fortissimo.

In the fourth quarter of 2012, eight private equity deals were valued at $557 million, compared with $271 million invested in 16 deals in Q3/2012, and $1.2 billion invested in 13 deals in Q4/2011. The average deal in Q4/2012 was valued at $69.6 million, compared to $16.9 million and $94.8 million in Q3/2012 and Q4/2011, respectively. (Figure 1)

Israeli PE funds accounted for 13 percent of PE investments in Q4/2012 with $70 million. This compares with 89 percent and 23 percent in Q3/2012 and Q4/2011, respectively. The largest private equity deal by an Israeli fund was the $45 million turnaround deal of Phoenicia Glass Works, a manufacturer of glass containers, by Fortissimo. The transaction accounted for 64 percent of all PE activity by Israeli funds in the quarter.

Rick Mann, Partner and Head of M&A at GKH, noted: "In 2012 we saw private equity funds investing in a wide range of Israeli industries. While technology remains a major attraction for private equity funds in Israel, established companies in more traditional businesses have also drawn interest. The prevalent players continue to be Israeli private equity firms, like FIMI, Fortissimo and Beresheit, although the larger PE transactions are often executed by international firms. The first quarter of 2013 has already seen the beginning of significant activity by foreign hedge funds in distressed debt situations, and it will be interesting to see whether this becomes part of a broader pattern in Israel."

Israeli private equity deals by sector

In 2012, the software sector attracted the largest share - 52 percent - of total deal value. Cleantech transactions followed with 11 percent, which compared with 32 percent in 2011 when cleantech led all investments. Communications attracted 9 percent, and miscellaneous technologies sector followed with 7 percent.

Israeli private equity deals by type

In Q4/2012, buyouts continued to attract the largest share of investments, as in two last years, with three deals accounting for $367 million or 66 percent of aggregate deal value. The largest transaction was a $250 million buyout of Ex Libris, an enterprise applications company, by foreign PE investor Golden Gate Capital. Two straight equity deals followed with $130 million or 23 percent of total deal value, while three turnaround investments accounted for the remaining 11 percent.

Israeli private equity funds

The IVC-Online Database maintains data on 24 active Israeli private equity management companies with a total of $7.8 billion under management. Four Israeli private equity funds raised $1.1 billion in 2012.

Marianna Shapira, Research Manager at IVC, commented: "The Israeli PE market is smaller both in terms of deal volume and local capital under management than US and European markets, but tends to follow international trends nonetheless. Forecasts for the global market are pointing to increased, though unevenly spread, activity in 2013. We believe the same can be projected for the Israeli market, which thus far has been mostly influenced by individual tipping point cases such as the Paradigm deal."

Methodology

The Survey reviews Israeli private equity deals involving Israeli and foreign private equity funds and other investors- both Israeli and foreign. The current Survey is based on the activity of 82 private equity funds of which 25 are Israeli and 57 are foreign. This survey reviewed the following types of private equity financing deals: straight equity, buyouts, mezzanine, distressed debt and turnaround/distressed equity.

Figure 1: Private Equity Deals by Quarter ($m)


Figure 2: Distribution of Private Equity Investors (%)


The data are based on information received directly from the funds and from the IVC Online Database (www.ivc-online.com). Full information regarding the Israeli private equity industry will be available in the IVC 2013 Yearbook to be published in April.

Additional survey information will be published on IVC Research Center website

For additional information, please visit: www.ivc-online.com or contact:

Marianna Shapira, Research Manager, IVC +972-73-212-2339 marianna@ivc-online.com

IVC Research Center is Israel's leading research center providing business leaders with an unmatched wealth of data on Israel's high-tech, venture capital and private equity industries. IVC products and services are used regularly by high-tech companies, venture capital funds, private investors, financial investors and institutions, as well as public entities such as the Office of the Prime Minister, the Central Bureau of Statistics, the Bank of Israel and the Office of the Chief Scientist.

IVC owns and operates the IVC Online Database (www.ivc-online.com) containing over 8,500 Israeli high-tech companies, venture capital funds, investment companies, angels and technology incubators, as well as news updates and lots more. Among IVC products and publications are the IVC Quarterly Survey, which for over 15 years has been analyzing capital raising trends by Israeli high-tech companies, and the most comprehensive guide to Israeli high technology and venture capital - the IVC 2013 Yearbook, due to be published in April 2013.

Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co. is one of Israel's leading corporate and securities law firms, providing superior and innovative legal services. GKH is engaged in all aspects of corporate and commercial legal practice, representing a large number of publicly held corporations traded on US, Israeli and European stock exchanges. The firm also represents international investment banks, privately held corporations of all sizes, newly formed businesses, partnerships and joint ventures. Clients comprise a broad range of industrial, commercial, energy, retail, transportation, financial and service enterprises, including the specialized businesses of telecommunications, banking, biotechnology, pharmaceuticals, electronics, software, real estate, research and development, commodities and venture capital. The firm's expertise includes representation before government ministries, regulatory agencies and the Bank of Israel. The firm's professional staff consists of over 100 professionals, including a large group of attorneys with US and UK licenses and work experience. GKH attorneys have served on several governmental advisory committees.

Material in this work is for general educational purposes only, and should not be construed as legal advice or legal opinion on any specific facts or circumstances, and reflects personal views of the authors and not necessarily those of their firm or any of its clients. For legal advice, please consult your personal lawyer or other appropriate professional.