The Israeli private equity industry saw 90 investments $3.4 billion in 2015, up 3% from $3.3 billion in 2014, but 3% below the $3.5 billion record amount invested in private equity deals in 2012, according to the latest IVC Shibolet Private Equity Survey by IVC Research Center and Shibolet & Co. Law Firm. The number of private equity deals in 2015, however, was the highest ever - up 13% from the previous record of 80 deals closed in 2014.
In the fourth quarter of 2015, 20 Israeli private equity deals totaled $841 million, 13% above the past 5-year average of $747 million. The number of private equity deals in the fourth quarter, however, was the same as in the preceding quarter and the corresponding quarter. The most prominent deal in the fourth quarter of 2015 was the $300 million investment in Bioenergy Infrastructure Group, followed by the $180 million buyout of Diamonds Direct, a jewelry company, by Blackstone Group.
Israeli private equity funds intensified their activity throughout 2015, spending $902 million, or 27% of total investment up19% from the $760 million they invested in 2014, and up 42% from $636 million invested in 2013. The three largest private equity deals in 2015 accounted for 23% of their total investments: the two buyouts by FIMI Opportunity Funds– Hadera Paper ($97 million) and Polyram ($59 million), and the $50 million straight equity investment in Bioenergy Infrastructure Group, a UK biomass power company, by HeliosEnergy.
Foreign private equity funds accounted for the majority of Israeli private equity investments in 2015 with $2.2 billion or 64% of the total capital – 9% down from $2.4 billion invested by foreign private equity funds in 2014, the record to date. The top five deals in 2015, were worth more than $150 million each. The two largest deals were both in the second quarter of 2015 - Lumenis's $510 million buyout by XIO Group and ClickSoftware's $438 million buyout by Francisco Partners. These two deals alone accounted for 28% of total private equity proceeds in 2015.
Shibolet & Co. partner Omer Ben-Zvi said, "The number of Israeli private equity deals and their total dollar amount in 2015 compared to previous recent years show a stable growth of this market. An interesting sector to be noticed in the private equity arena is life science technologies which produced 15 deals in the amount of $626 million in 2015, compared to 11 deals at $59 million in 2014. We see more mature companies like Lumenis growing and entering that arena. On the other hand, in the Internet sector we saw a decrease in the total amount in PE deals, from $1.2 billion in 2014 to $307 million in 2015 with the same number of deals."
A total of 48 technology deals generated $2 billion, or 58% of the total private equity investments in 2015. The amount was 5% below the $2.1 billion (63%) invested in 49 technology deals in 2014. The software and life sciences sectors led private equity investments with 22% and 19%, respectively, partially due to the Lumenis and ClickSoftware deals.
Straight equity transactions show a continuing uptrend featuring them as the favored investment mechanism for private equity funds, with 65 deals in 2015, compared to 62 deals closed in 2014, 48 in 2013 and only 22 in 2012. The volume of capital invested in companies directly also increased to $1.4 billion invested in 2015, 42% of total private equity investments, and up 16% from the previous record of $1.2 billion (36% of total) in 2012.
Israeli private equity investors
IVC research manager Marianna Shapira said, "The current uptrend in the Israeli private equity market was fortified in 2015 with 11 funds having raised approximately $1.5 billion throughout the passing year. Moreover, we are tracking 28 active Israeli private equity management companies managing a total of nearly $9 billion, and more than ten new funds are currently in the process of capital raising, expected to raise up to $1 billion by the end of the year. We therefore expect private equity activity in 2016 to remain dynamic."
Shapira notes that a large part of the projected activity will focus on growth stage investments: "Many of the funds currently active, and some of the ones presently in the process of raising capital are dedicated to late stage investments, including funds focused on growth stage companies, as well as distress situations, turnarounds and debt funds. Inspecting the funds currently in process, it seems cleantech, life science, communication, media and real estate are the sectors most likely to attract investments during 2016," she said.
Ben-Zvi added, "Looking at the number of new growth funds raising capital and the over subscription for Israeli PE funds we have seen, we believe that the positive trend in the Israeli private equity market is likely to continue. However, one has to remember that the private equity market is affected by global changes, so recent developments, such as the ones in the Asian capital markets, are likely to have an impact on the Israeli private equity market as well."
Published by Globes [online], Israel business news - www.globes-online.com - on February 3, 2016
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