In 2014, 45 Israeli and foreign private equity funds invested $2.18 billion in 69 deals, up 10% from the $1.98 billion invested in 71 deals in 2013, according to the latest IVC Research Center-Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co. (GKH Law Offices) survey.
The IVC-GKH survey also found that in the fourth quarter of 2014, $317 million was invested by Israeli and foreign private equity investors in 16 deals, up from $266 million invested in 13 deals in 2013. However, this was well below $1.26 billion (the second highest quarterly amount since 2011) invested in 12 deals in the third quarter of 2014. The number of deals in 2014’s final quarter equaled the four-year quarterly average.
Two buyouts by foreign private equity funds accounted for 52% of investments in 2014: Apax Partners’ $650 million buyout of Answers Corp., owner of Q&A website Answers.com, and Oaktree Capital’s $475 million buyout of utilities company Veolia Israel.
In 2014, Israeli private equity funds invested $658 million (30% of total deal value) slightly above the $636 million (32%) invested in 2013, but far below the $1.38 billion (40%) invested in 2012.
In the fourth quarter of 2014, Israeli private equity funds invested $213 million, 67% of all Israeli private equity transactions, compared to $91 million (34%) in the corresponding quarter of 2013, and $114 million (9%) in the preceding quarter of 2014. Yesodot Private Equity, an Israeli private equity fund, acquired Shikun & Binui's Solar Facilities for $105 million - the largest deal in the quarter - which accounted for 33% of quarterly deal value.
Private equity fund involvement in Israeli technology companies widened in 2014 as investments reached $1.13 billion (52%), compared with $596 million (30%) in 2013, up 90%.
GKH head of M&A Rick Mann said, "The growing role of technology-driven transactions in the private equity space in Israel is the key lesson of 2014. Israel continues to be the focus of funds looking for innovative technology, and this market is no longer limited to traditional venture capital players. While there are several interesting opportunities for private equity funds in other business areas, such as the insurance and finance and oil and gas industries, transactions in those industries require more patience and a willingness to endure regulatory approval processes that many perceive as burdensome. We fully expect technology to lead in 2015 as well."
In 2014, 13 buyout deals accounted for $1.68 billion or 77% of total deal value, up 18% from $1.42 billion (72%) invested via 13 buyouts in 2013. Straight equity deals captured $445 million or 21% of private equity investments, down from $475 million (24%) in 2013. In the last two years, the number of straight equity deals has jumped to an average of 51, while in the two previous years, the average was 23.
In the fourth quarter of 2014, private equity fund investments were almost equally divided between straight equity and buyout deals, with $166 million (52%) and $151 million (48%) invested, respectively. This contrasts with the fourth quarter of 2013, when straight equity deals dominated with $197 million (74%), and the third quarter of 2014, when buyouts accounted for $1.2 billion or 97% of total investments.
IVC Research Center research manager Marianna Shapira said, "According to our latest data, 12 Israeli private equity funds raised a total of $1.24 billion in 2014, and an additional 12 are in the process of raising capital. Looking at capital availability in the local private equity sector and at funds projected to be raised during 2015, we believe 2015 will see growth continuing in private equity investments in the cleantech, communications, Internet and software industries. With private equity funds and venture capital growth funds focusing on the high-tech sector, the expected competition could drive valuations higher than they were in 2014. Moreover, we expect to see a return to prominence of the real estate and infrastructure sectors as an increasing number of funds are being raised for such investments.”
The IVC-Online Database maintains data on 33 active Israeli private equity management companies with a total of $7.23 billion under management. In 2014, the 12 private equity funds that raised capital of $1.24 million compared with a 10-year average of five funds that raised an average of $700 million annually. 12 additional funds are currently in the process of raising capital, and $1.1 billion is forecast to be raised during 2015.
Published by Globes [online], Israel business news - www.globes-online.com - on February 4, 2015
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