Israeli private equity deal-making jumped to $1.7 billion in 18 deals, in the third quarter of 2016, the highest quarterly amount in the past two years, the latest IVC-Shibolet survey reports. The amount was 32% above the $1.3 billion reached in the previous quarter and over four times the $358 million achieved in the third quarter of 2015. The number of deals was the same as in the last quarter, but slightly down from the 22 deals quarterly average of the past 5 years.
While the first to third quarters of 2016 in Israeli private equity had the best performance in five past years - with nearly $3.26 billion invested and exceeding the entire 2015’s $3.22 billion - it was mostly due to the largest buyout of Keter Plastic by BC Partners for $1.4 billion. This single deal accounted for 43% of the entire period’s capital proceeds. Actually, the number of deals dropped to 53 transactions in the first three quarters of 2016, compared with 77 deals in the first nine months of 2015, when the total reached $2.44 billion.
Israeli private equity funds kept a low profile in the first nine months of 2016: they participated in less deals than in 2015 - 26 transactions in the first three quarters of 2-16 compared with 47 deals in the corresponding period of 2015, and invested $484 million, or 15% of capital proceeds - a 29% year-on-year fall from $685 million (28%).
The two largest deals, above $50 million each, involving Israeli private equity funds over this period, were buyout transactions, which accounted for 29% of Israeli private equity fund investments. The largest deal was the $90 million buyout of Arena Mall by Reality fund in the second quarter of 2016.
Foreign private equity funds led Israeli private equity deal-making both in the third quarter and in the first three quarters of 2016, with $2.8 billion invested in 27 transactions. The three top buyouts captured 75%of the total capital volume, while the exceptional Keter Plastic deal was the most prominent in five years.
Shibolet & Co. partner Omer Ben-Zvi said, "We are experiencing an annual volume increase even before year-end. This figure is highly influenced by single oversized deals, like the Keter buyout, but this is always the case in private equity markets there are always few very large deals alongside much smaller ones. Rather than a one-off deal, we regard the Keter transaction as a credibility reaffirmation of the local market by the international PE industry. We also saw a quarterly decrease in PE Tech activity, but looking at the recent late-stage VC fund raising expansion in this sector, we do not think the last quarter is indicative of a slowdown trend. Despite the instability in world economy and concerns for a potential slowdown, we believe that the local PE market is healthy and still benefits from a growth potential."
Technology transactions kept their pace in the first three quarters of 2016, with 38 deals totaling $1.5 billion or 47% of total capital volume, down from $1.8 billion (76%) invested in 40 transactions in the same period in 2015.
Traditional industries deal-making fell in the first nine months of 2016, with $1.7 billion invested in 15 deals. While the amount reflected the largest, $1.4 billion Keter Plastic deal, the number showed an actual drop from 37 deals performed a year earlier, when traditional industries transactions totaled $597 million.
The IVC-Online Database maintains data on 37 active Israeli private equity management companies with a total of $11.3 billion under management. In the first nine months of 2016, five Israeli private equity funds raised $1.72 billion, and three additional funds are currently in process of capital raising. IVC research manager Marianna Shapira said, "As the IVC-Shibolet Survey revealed, there were two major reasons for the drop in PE deal-making in the Israeli market: a decrease in Israeli PE funds' investments and the drop in traditional industry deal making. However, since the funds seem to have sufficient capital, and are likely to raise additional funding, possibly over half a billion dollars more, by the end of the year, we believe this is a temporary decrease, characteristic of the low-volume of business activity over the third quarter, and expect to see an increase over the few next quarters."
Published by Globes [online], Israel business news - www.globes-online.com - on November 9, 2016
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