from the May 2013 issue

2012 Israeli private equity transactions reach $2.6 billion

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

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 international firms often execute the larger PE transactions. 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.

Reprinted from the Israel High-Tech & Investment Report May 2013

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