Forty-six Israeli private equity deals amounted to $2.6 billion in 2012, 10% below the $2.9 billion invested in 63 deals in 2011, according to a report prepared by the IVC Research Center.
The buyout of software firm Paradigm Geophysical by Apax Partners and JMI Equity for $1 billion accounted for 39% of total annual deal value. Average deal size in 2012 was $56.2 million, compared with $45.6 million in the previous year.
Israeli PE funds invested $530 million in 2012, accounting for 21% of total PE investments. This compares with $963 million or 33% invested by Israeli PE funds in 2011. The largest private equity deal by an Israeli fund was the $80 million buyout of Starhome, a mobile infrastructure company, by Fortissimo.
In the fourth quarter of 2012, eight private equity deals were valued at $557 million, compared with $271 million invested in 16 deals in Q3/2012, and $1.2 billion invested in 13 deals in Q4/2011. The average deal in Q4/2012 was valued at $69.6 million, compared to $16.9 million and $94.8 million in Q3/2012 and Q4/2011, respectively.
Israeli PE funds accounted for 13% of PE investments in Q4/2012 with $70 million. This compares with 89% and 23% in Q3/2012 and Q4/2011, respectively. The largest private equity deal by an Israeli fund was the $45 million turnaround deal of Phoenicia Glass Works, a manufacturer of glass containers, by Fortissimo. The transaction accounted for 64% of all PE activity by Israeli funds in the quarter.
Rick Mann, Partner and Head of M&A at GKH, noted: "In 2012 we saw private equity funds investing in a wide range of Israeli industries. While technology remains a major attraction for private equity funds in Israel, established companies in more traditional businesses have also drawn interest.
"The prevalent players continue to be Israeli private equity firms, like FIMI, Fortissimo and Beresheit, although the larger PE transactions are often executed by international firms. The first quarter of 2013 has already seen the beginning of significant activity by foreign hedge funds in distressed debt situations, and it will be interesting to see whether this becomes part of a broader pattern in Israel."
In 2012, the software sector attracted the largest share — 52% — of total deal value. Cleantech transactions followed with 11%, which compared with 32% in 2011 when cleantech led all investments. Communications attracted 9%, and miscellaneous technologies sector followed with 7%.
In Q4/2012, buyouts continued to attract the largest share of investments, as in two last years, with three deals accounting for $367 million or 66% of aggregate deal value.
The largest transaction was a $250 million buyout of Ex Libris, an enterprise applications company, by foreign PE investor Golden Gate Capital. Two straight equity deals followed with $130 million or 23% of total deal value, while three turnaround investments accounted for the remaining 11%.
The IVC-Online Database maintains data on 24 active Israeli private equity management companies with a total of $7.8 billion under management. Four Israeli private equity funds raised $1.1 billion in 2012.
Marianna Shapira, research manager at IVC, commented: “The Israeli PE market is smaller both in terms of deal volume and local capital under management than US and European markets, but tends to follow international trends nonetheless.
"Forecasts for the global market are pointing to increased, though unevenly spread, activity in 2013. We believe the same can be projected for the Israeli market, which thus far has been mostly influenced by individual tipping point cases such as the Paradigm deal.”