The largest transaction was the $500 million buyout of tire manufacturer Alliance Tire Company by KKR, a foreign private equity fund. The average deal in the first half of 2013 was valued at $55 million, compared to $69 million in the first half of 2012.
In the second quarter of 2013, nine Israeli private equity transactions were valued at $722 million, compared with just $217 million invested in eight deals in the first quarter of 2013. Second quarter activity, however, was down 58% from the second quarter of 2012 when $1.701 billion was invested in 17 transactions.
Alliance Tire’s $500 million buyout captured 69% of total quarterly deal value. The average deal in the second quarter of 2013 was valued at $80 million, compared to $27 million and $100 million in the first quarter of 2013 and the second quarter of 2012, respectively.
In the first half of 2013, Israeli PE funds made investments of $182 million — 19% of total investments. This compares with $252 million or 14% of all PE activity in the first half of 2012.
In the second quarter of 2013, Israeli PE fund investments accounted for $90 million or 13% of total transactions. The amount is just short of the $92 million invested in the previous quarter, when Israeli funds accounted for 42% of all investments.
In the second quarter of 2012, Israeli PE funds invested $209 million, which comprised just 12% of investments. The largest transaction in the second quarter of 2013 was the buyout of aerospace manufacturer TAT Technologies by FIMI for $35 million. The transaction accounted for 39% of all PE activity by Israeli funds in the quarter.
Rick Mann, partner and head of M&A at GKH, noted that "the KKR/Alliance Tire transaction demonstrates once again the interest international private equity firms have in the larger transactions in Israel. This transaction also shows that foreign investor interest in Israel is not limited to pure technology companies.
"As legislation to reduce concentration in the Israeli economy progresses, I expect to see an increase in private equity activity in traditional sectors of the economy in addition to continuing strong interest in Israeli technology and innovation."
Israeli private equity deals by sector
In the first half of 2013, the industrial sector accounted for the largest share of deal value with 58%, followed by the retail sector with 18%, cleantech with 13% and services with 7%. No software deals were made in the first half of 2013 in contrast to the same period in 2012 when software accounted for a 60% share of investments.
In the second quarter of 2013, the industrial sector led investments for the first time in three years, capturing 75% of deal value, mostly due to the Alliance Tire buyout. No deals in this sector occurred in the previous quarter, and in the second quarter of 2013 the sector accounted for just 2% of deal value.
Retail sector transactions followed with 17%, while services, financial and cleantech sector investments combined to account for the remaining 8%.
Israeli private equity deals by type
In the first half of 2013, eight buyout deals accounted for $739 million or 79% of total transaction value. This compares to 10 buyouts which attracted $1.5 billion or 85% in the first half of 2012. Seven straight equity deals followed with $170 million or 18%, while mezzanine deals attracted the remaining 3%.
In the second quarter of 2013, five buyout deals attracted $664 million, 92% of total transaction value. The largest buyout was the $500 million acquisition of Alliance. Buyouts accounted for 34% and 87% of deal value in the first quarter of 2013 and the second quarter of 2012, respectively.
Four straight equity deals captured $58 million in the second quarter – the remaining 8% of total deal value. The largest straight equity deal was by foreign PE fund Fidelity Group, which invested $28 million in supermarket chain Rami Levy.
Israeli private equity funds
The IVC-Online Database maintains data on 25 active Israeli private equity management companies with a total of $7.2 billion under management. In the first half of 2013, five Israeli private equity funds raised $676 million.
According to Marianna Shapira, research manager at IVC, "The current year looks encouraging for Israel's private equity industry, as almost $700 million has already been raised by Israeli private equity funds and another $1 billion is expected to be raised throughout 2013-2014.
"Noy and Israel Infrastructure Fund, the two largest funds, have together accounted for two-thirds of all capital raised in the first half of 2013. As a result, their favored sectors — infrastructure, cleantech and real estate — should be marked as primary targets of investment."