The Israeli Private Equity Market – Q1/2015

Guest post by Marianna Shapira, Research Manager, IVC Research Center & Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co.

IVC and GKH report:

Israeli private equity deal value down 55%

Key facts:

  • Israeli PE fundraising in early 2015 reaches $1.5 billion
  • Israeli private equity fund activity down 65% from previous quarter
  • Technology sector continues to dominate, with 85% of private equity investments in the Q1/2015

Tel Aviv, Israel, May 11, 2015. In Q1/2015, 14 Israeli private equity deals accounted for $310 million, a drop of 55 percent from $696 million invested by Israeli and foreign private equity investors in Q4/2014. The amount was also 34 percent below the $471 million invested in Q1/2014. (Figure 1)

The largest deal in the quarter, which accounted for 52 percent of total quarterly investments, was the $162 million investment by foreign PE fund Northleaf Capital and geothermal company Ormat Technologies in a new joint venture.

In Q1/2015, Israeli private equity fund investments of $77 million accounted for 25 percent of all investments. This compared to $217 million and $262 million in Q4/20124 and Q1/2014, respectively. All private equity transactions involving Israeli PE funds in the first quarter of 2015 were valued at under $40 million.

Israeli high-tech transactions captured $263 million or 85 percent of total private equity investments in Q1/2015, compared with 71 percent and 41 percent in Q4/2014 and Q1/2014, respectively. Even though the amount invested in high-tech deals was down 47 percent from the previous quarter, it was up 37 percent from the amount invested in technology companies in Q1/2014. (Figure 2)

Rick Mann, Partner and Head of M&A at GKH, noted: “The strong growth in the portion of PE transactions that involve technology companies is an important trend. When non-tech deals occur, they are often led by local PE funds. Foreign PE funds continue to show a strong interest in Israel in tech deals and despite the lower overall figures in Q1/2015, we expect higher results in the coming quarters.”

In Q1/2015, straight equity deals dominated Israeli private equity transactions with $290 million or 94 percent of total investments, while in Q4/2014 and Q1/2014 buyout deals accounted for the majority of investments, with 75 percent and 52 percent of deal value, respectively. In terms of the number of deals, straight equity transactions accounted for more than 70 percent of all deals performed in Q1/2015, Q4/2014 and Q1/2014.

Israeli private equity investors

“On the one hand, the first quarter of 2015 demonstrated a marked slowdown in Israeli private equity dealmaking, mostly due to the decline in Israeli PE fund activity,” noted Marianna Shapira, Research Manager at IVC Research Center. “On the other hand,” she observed, “PE fund raising has already surpassed our earlier projections. From the beginning of 2015, three Israeli private equity funds raised approximately $1.5 billion, and 11 other funds are currently engaged in fund raising. This in large part explains the drop in PE transactions at the beginning of the year, as most funds were short of capital and focused on capital raising efforts. We expect the situation in the Israeli PE market to improve significantly later this year both in terms of deal value and number of transactions as newly raised funds start engaging in investment activity. Moreover, we expect growth in Israeli PE fund involvement both in technology and non-technology transactions throughout 2015.”

The IVC-Online Database maintains data on 34 active Israeli private equity management companies with a total of $7.4 billion under management. Currently, 11 funds are raising capital, and are expected to close some $800 million.

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

chart1

Figure 2: Private Equity Investments by Industry Type by Quarter (%)

chart2

Methodology

The Summary of Israeli Private Equity Deals Q4/2014reflects 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 117 private equity funds of which 34 are Israeli and 83 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).

For additional information:

Marianna Shapira, Research Manager, IVC +972-73-212-2339,

marianna@ivc-online.com

About the authors of this report:

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 12,000 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, financings, exits, acquisitions, founders, key executives and R&D centers.
  • Publications include newsletters; Daily Alerts; the IVC High-Tech Yearbook; surveys; research papers and reports.
  • 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 May 2015.

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