IVC-GKH: Summary of Israeli Private Equity Deals - Q3/2014

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

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IVC and GKH report:

Value of private equity deals in Q3/2014 drops 27% from Q3/2013.

Key facts:

  • Israeli PE fund share grows in Q1-Q3/2014, reaching 42%
  • In Q3/2014 buyout deals return to dominate the PE market

Tel Aviv, Israel, November 25, 2014. In Q3/2014, Israeli and foreign private equity investors entered into 11 transactions valued at $606 million, down 27 percent from $835 million in Q3/2013 (22 deals), but well in excess of the $79 million – the lowest quarterly amount in four years – invested in Q2/2014 via 21 deals. (Figure 1)

Foreign PE fund Oaktree Capital completed the largest deal in the third quarter, which accounted for 78 percent of the dealmaking. It acquired Veolia Israel, a provider of water, waste and energy management solutions for $475 million.

In the first three quarters of 2014, 51 private equity deals by Israeli and foreign PE investors accounted for $1.2 billion, down 27 percent from $1.7 billion invested in 58 deals in the year-earlier period and also well below the $2.1 billion and $1.6 billion invested in Q1-Q3/2012 and Q1-Q3/2011, respectively.

In Q3/2014, Israeli private equity funds invested $114 million or 19 percent of all PE investments made in Israel, which compared with just $29 million invested in Q2/2014 (the lowest quarter since 2011) and $325 million invested in Q3/2013. (Figure 2)

Rick Mann, Partner and Head of M&A at GKH, noted: "The Israeli private equity market data continues to show that Israeli private equity funds tend to be the most active in the Israeli market, but foreign private equity funds are generally behind the larger size transactions. The quarterly data tends to be influenced by one or two large transactions, and that is a pattern we expect to see continuing with significant investment opportunities in both the technology sector and the financial and industrial sectors."

In the Q1-Q3/2014 period, $519 million, or 42 percent of total transaction value, was invested by Israeli PE funds, compared with $518 million (30 percent of total) invested in the same period in 2013, and $488 million (23 percent) invested in Q1-Q3/2012.

In Q3/2014, five buyout transactions accounted for $576 million or 95 percent of all investments, with $30 million in straight equity deals making up the remaining 5 percent. In Q3/2013 five buyouts captured $653 million (78 percent of total), while Q2/2014 was exceptional – 21 straight equity deals attracted $78 million or 100 percent of all the dealmaking in the quarter.

In the first three quarters of 2014, 12 buyout deals accounted for $929 million (75 percent of total deal value), a decrease of 32 percent from $1.4 billion (12 deals, 80 percent) in Q1-Q3/2013, and 44 percent from $1.7 billion (15 deals, 79 percent) in Q1-Q3/2012.

Marianna Shapira, Research Manager at IVC Research Center noted, "A review of the data shows PE investments in technology companies differ from those in non-technology companies in a number of ways. First, straight equity deals tend to be directed to technology companies, while buyouts and other mechanisms are used mostly in non-technology deals. Secondly, technology investments are, on average, far lower than those for non-technology – about half the amount. The first two factors combine into a third: the number of deals in the technology sector is 50% higher than those of non-tech deals by PE funds. Interestingly", points our Shapira, "these investment patterns have been followed by both local and foreign funds in their Israeli investments, while substantially different strategies may be employed in foreign PE markets by the same funds."

Israeli private equity investors

The IVC-Online Database maintains data on 30 active Israeli private equity management companies with a total of $8.5 billion under management. Since the beginning of 2014, 12 Israeli PE funds raised $1.2 billion to date, and twelve additional funds are in the process of capital raising.

Methodology

The Summary of Israeli Private Equity Deals Q3/2014reflects information developed from IVC's Quarterly PE Survey, sponsored by Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co., and 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 100 private equity funds of which 30 are Israeli and 70 are foreign. This survey reviews the following types of private equity financing deals: straight equity, buyouts, mezzanine, distressed debt and turnaround/distressed equity. The data are based on information received directly from the funds and from the IVC-Online Database (www.ivc-online.com).


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

About the authors of this survey:

IVC Research Center is the leading online provider of data and analyses on Israel's high-tech, venture capital and private equity industries. Its information is used by all key decision-makers, strategic and financial investors, government agencies and academic and research institutions in Israel.

IVC-Online Database (www.ivc-online.com) showcases over 11,000 Israeli technology startups, and includes information on private companies, investors, venture capital and private equity funds, angel groups, incubators, accelerators, investment firms, professional service providers, investments, financing, exits, acquisitions, founders, key executives and R&D centers.

Publications include newsletters; Daily Alerts; the IVC High-Tech Yearbookthe Israel High-Tech, Venture Capital, Startup and Private Equity Directory; surveys; research papers and reports; and interactive dashboards.

IVC Industry Analytics – analysis, research and insights into the status, main trends and opportunities related to exits, investments, investors, sectors and stages.

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. Reproduced with permission from IVC Research Center. This work reflects the law at the time of writing in November 2014.

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