In 2016, Israeli and foreign private equity funds invested a record $3.5 billion in 68 deals, 14% up from just under the $3.1 billion in 2015, and 29% up from $2.73 billion in 2014, IVC - Shibolet reports. The number of deals, however, dropped 17% in 2016, down from 103 deals in 2015, and 17% below the five-year average of 82 private equity deal.
The four largest deals closed in 2016 were all buyouts above $100 million each, accounting for $2.54 billion, or 72%, of proceeds. The buyout of Keter Plastic by BC Partners for $1.4 billion - the largest Israeli private equity deal recorded in five years - was followed by the $643 million buyout of Xura by Siris Capital. In third place was the $400 million buyout of Sintec Media by Francisco Partners, while FIMI carried out a $100 million buyout of G4S Israel.
Shibolet & Co. partner Omer Ben-Zvi said, "Israel experienced a substantial decrease in the number of private equity investment deals during 2016. This is in line with the decline in the US private equity market. However, the 2016 annual private equity deal amount - the highest ever recorded - was encouraging, as was the stable activity of foreign PE funds with another annual record. Another strength sign is the continued activity of the private equity technology sector. We therefore believe it is too early to conclude that we are witnessing the beginning of a slowdown in the Israeli private equity industry."
He added, "We see positive signs in the continued fundraising by venture capital funds focusing on the Israeli high-tech industry and the increasing number of growth opportunities, as well as fundraising by Israeli PE funds and foreign PE funds expressing interest in Israel."
In the fourth quarter of 2016, Israeli private equity deal-making decreased, as 16 private equity deals accounted for $412 million, 46% below the $757 million invested in 25 deals in the fourth quarter of 2015, and a 74% drop from the $1.6 billion invested in 14 deals in the previous quarter. Both the amount and number of deals were below the five-year average, a decrease of 38% and 24%, respectively.
Israeli private equity fund activity fell in 2016, with 30 funds investing $630 million, 18% of proceeds - the lowest share for Israeli PE fund investments in the past five years. This compared with the record $1.06 billion (34%) invested by 36 Israeli PE funds in 2015. The number of deals was also down - 28% with 38 deals, compared to the five-year average of 53 deals.
Three buyouts performed by Israeli PE funds in 2016 were above $50 million each, capturing 37% of total Israeli PE fund investments. FIMI led, with two prominent deals, both in the fourth quarter of 2016 - a buyout of G4S Israel for $100 million, followed by the $76 million buyout of Galam. Reality Fund acquired 65% of Arena Mall in Herzliya for NIS 90 million in the first quarter of 2016.
Foreign PE fund investments retained last year's average activity levels, with 33 deals in 2016, despite the fact that the number of funds investing in 2016 dropped 26% - from 43 actively-involved foreign PE funds in 2015 to only 32 funds in the following year. However, in terms of capital, foreign private equity investments peaked, with $2.9 billion (82%), up from $2.03 billion (66%) invested in 2015. Three buyouts were responsible for this record amount, capturing 85% of foreign private equity investments in 2016, including the Keter Plastic, Xura and Sintec Media buyouts.
IVC research manager Marianna Shapira draws a direct line between the state of private equity fundraising and the decline in deal-making during the second half of the year: "Analyzing the notable slowdown in the number of investments made in 2016, we saw Israeli fund activity fall below average levels, and far more dramatically than foreign funds’ investments. This is not due to lack of opportunities in the Israeli market, nor a result of foreign competition, but rather seems to be related to the capital available for new investments. Both the number of active local PE funds, and the number of funds to raise new capital in 2016 dropped compared to previous years. With six funds currently in the process of raising capital, it seems that many major funds have been focused on their fundraising efforts, resulting in fewer deals made."
There are currently 39 active Israeli private equity management companies monitored by IVC Research Center, with $12.12 billion under management, and an estimated $1.2 billion available for new investments. In 2016, four Israeli private equity funds raised $1.3 billion.
Technology deals kept a strong momentum in PE deals, with 44 transactions performed in 2016, the same as the five-year average, accounting for 65% of the deals, and generating $1.61 billion, or 46%, of capital volume. Two of the top buyouts mentioned - the Xura and Sintec Media deals, contributed.
Published by Globes [online], Israel business news - www.globes-online.com - on February 7, 2017
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