Private equity investment in Israel in the first half of 2016 fell 24% to $1.6 billion in 29 private equity deals from $2.1 billion in 53 deals in the corresponding period of 2015, according to the IVC and Shibolet & Co. report. However, the average private equity deal in the first half of 2016 was $53 million, up from the $39 million average in the first half of 2016.
In the second quarter of 2016, 13 Israeli private equity deals accounted for $1.3 billion, up from $270 million invested in the preceding quarter, but below the $1.6 billion in the corresponding quarter of 2015. The average deal amount climbed to $98 million, the highest quarterly average in the past four years.
The two largest private equity deals took place in the second quarter, accounting for 67% of total capital investments: the $643 million buyout of Xura (formerly Comverse) by US private equity fund Siris Capital, and the $400 million buyout of Sintec Media by Francisco Partners. In the first quarter of 2016, no private equity deals passed the $100 million threshold.
In the second quarter of 2016, Israeli private equity funds invested $184 million, or 19% of total private equity investments, up 55% from the $119 million invested in the first quarter of 2016. The largest deal performed by an Israeli fund in the second quarter was the $90 million buyout of Arena Mall Herzliya, by real estate fund Reality Investment. In the first half of 2016, investments performed by Israeli private equity funds reached $303 million, representing a year-on-year decline.
Foreign private equity funds led in the second quarter of 2016, with $1.1 billion, including the two largest buyouts so far. The share of foreign private equity funds increased to 86% out of total investments, as compared with 81% in the second quarter of 2016.
Shibolet & Co partner Omer Ben-Zvi said, "After a weak first quarter, we are happy to see the second quarter of 2016 scope of private equity deals growing again, as we have previously foreseen. We believe that this is evidence of the overall further strengthening in the local industry. This is especially true in the Israeli high-tech sector, which is producing more and more mature companies that become potential targets for private equity investors. A case in point in the second quarter was the continuous activity of Francisco Partners, a long time player in the Israeli PE market, alongside newcomer Siris Capital Group, which made its first investment in Israel,"
He added, "Obviously, the local PE market is sensitive to macroeconomic fluctuations, such as the US interest rate expected markup and Asian markets slowdown."
The Israeli technology sector continued to lead private equity investments in the second quarter of 2016, with $1.1 billion invested in eight deals, 87% of investments.
The first six months of 2016 clearly demonstrated private equity investors' preferences - $1.4 billion, or 88%, of all PE investments were made in the technology sector. This was the largest share for this period so far, exceeding even the first half of 2015’s 76%share, when $1.6 billion was invested in the Israeli high-tech industry by private equity funds.
According to the IVC-Shibolet PE Survey findings, straight equity deals performance was considerably down in the second quarter of 2016, as well as the first half of 2016. Only 19 straight equity transactions totaled $204 million (16%) in the first half of 2016, 50% down from 40 deals performed in both the first halves of 2015 and 2014, when they were the preferred tool by PE funds. The decrease in the number of straight equity deals accounted for the 74% drop in the amount invested in the first half of 2016, with a mere $204 million, as compared with the record high $774 million invested in the same period of 2015. The largest straight equity deal in the first half of 2016 was a $30 million investment in ForeScout, by Wellington, a US-based PE fund.
IVC research manager Marianna Shapira said, "Indeed it seems global economy trends have influenced the Israeli private equity market in the first half of 2016. PE funds have certainly taken a cautious approach to their asset allocation, minimizing risks and sticking to classic PE investment strategies, especially evident in the second quarter, which featured preference for more traditional private equity mechanisms, such as buyouts, and decrease in riskier minority-stake straight equity transactions."
Israeli private equity investors According to the IVC-Online Database, 41 Israeli private equity management companies are currently active, with a total of nearly $10.8 billion under management. To date, five Israeli private equity funds raised capital in 2016, closing $1.7 billion in total, with FIMI’s sixth fund of $1.1 billion the most prominent. Three more funds are in the midst of capital raising, targeting an approximate total amount of $600 million.
Published by Globes [online], Israel business news - www.globes-online.com - on July 26, 2016
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