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Summary of Israeli Private Equity Deals – 2011

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Tuesday, February 28th, 2012

As reported by IVC:

IVC Reports: $2.88 billion in private equity deals in 2011, up 18% from 2010 Buyout deals up 150% in 2011

The following are the findings of the IVC-GKH Quarterly Private Equity (PE) Survey conducted by IVC Research Center, which for more than 15 years has been at the forefront of private equity, high-tech and venture capital research in Israel. This Survey is sponsored by Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co. (GKH), a leading Israeli corporate law firm specializing in M&A, joint ventures, venture capital, equity and debt financing. The Survey reviews Israeli private equity deals involving Israeli and foreign PE funds and other investors – both Israeli and foreign. The current Survey is based on the activity of 68 private equity funds of which 29 are Israeli and 39 are foreign.

In 2011, 60 Israeli private equity deals attracted $2.88 billion, an 18 percent increase from $2.44 billion attracted by 65 deals in 2010. Ten deals, each more than $100 million, accounted for $2.15 billion or 75 percent of the total amount. This compared to five deals of more than $100 million each, totaling $1.32 billion, which made up 54 percent of total private equity deals in 2010. The average deal in 2011 was $48 million, compared to $38 million in 2010.
In 2011, Israeli private equity funds accounted for 31 percent of total private equity activity with $904 million invested. Israel Infrastructure Fund‘s buyout of Derech Eretz Highways for $208 million and FIMI‘s buyout of Ormat for $130 million were the two largest Israeli private equity fund deals, together accounting for 37 percent of Israeli PE fund activity.

In 2011, private equity deals valued at over $50 million accounted for 23 percent of the total number of deals, compared to 17 percent in 2010. Deals valued at $20-50 million accounted for 13 percent, compared to 20 percent in the year earlier period. Deals valued at under $20 million accounted for the remaining 64 percent, just above the 63 percent figure for 2010.

Rick Mann, Managing Partner of GKH, commented: “In 2011, we saw the continuation of two trends in the Israeli private equity market. The first was the growing role of local private equity funds in small and medium size deals, but the dominance of foreign private equity funds in large deals. The second was the attractiveness of Israeli technology-driven businesses to foreign private equity investors. The latter was particularly evident in the cleantech, software and Internet-related fields. I would expect these trends to continue in 2012.”

In the fourth quarter of 2011, $898 million – the highest quarterly amount in two years – was invested in 15 Israeli private equity deals. This amount was up 10 percent from $819 million in Q3 2011 and 12 percent from $803 million in Q4 2010(Figure 1). The average deal size in Q4 2011 was $60 million, compared to $55 million in the previous quarter and $50 million in the fourth quarter of 2010. Israeli private equity funds accounted for 29 percent of activity, compared to 41 percent in Q3 2011 and 100 percent in Q4 2010. Private equity deals valued at over $50 million accounted for 27 percent of the total number of deals, compared to 20 percent in the previous quarter and 6 percent in Q4 2010 (Figure 2).

Israeli private equity deals by sector

In 2011, as in the previous year, Cleantech led all sectors in private equity interest, accounting for 33 percent of total deal value, just below the 36 percent of 2010. The three largest deals included the buyout of Netafim by Permira Advisers for $366 million and Morgan Stanley‘s two $200 million straight equity investments in BrightSource and in Better Place.
Software accounted for 29 percent of deal value, mostly from three transactions: the $390 million buyout of Fundtech by GTCR, the $308 million buyout of Ness Technologies by Citi Venture Capital International and Riverwood Capital‘s $110 million purchase of SintecMedia. The Infrastructure sector accounted for 11 percent, which included Israel Infrastructure Fund‘s buyout of Derech Eretz Highways, cited above.

In the fourth quarter of 2011, the software sector led investments with 43 percent, followed closely by cleantech with 42 percent. The two sectors accounted for 86 percent of total deal value in the quarter.

Israeli private equity deals by type

This survey reviewed the following types of private equity financing deals: straight equity, buyouts, mezzanine, distressed debt and turnaround/distressed equity.
In 2011, 21 buyouts attracted $2.1 billion or 73 percent of aggregate deal value. This compares to 11 buyout deals that attracted $834 million or 34 percent in 2010. Nineteen straight equity deals accounted for $566 million or 20 percent of total deal value in 2011, compared with $1.1 billion (24 deals) or 43 percent in 2010, when straight equity led private equity investment. Sixteen distressed debt deals followed with $175 million or 6 percent, while mezzanine deals captured only one percent of total deal value in 2011.

In Q4 2011, six buyout deals led private equity investment with $634 million or 71 percent of total deal value, compared to five buyout deals valued at $711 million (87 percent) that led investments in Q3 2011 and two buyouts valued at $598 million or 75 percent in Q4 2010.

Marianna Shapira, Research Manager at IVC, observed, “Foreign private equity investors intensified their activity in Israeli buyout deals, boosting their share to 71 percent in Q4 2011. This demonstrates that Israel continues as a focal point for international companies seeking expansion and new business opportunities.”

Israeli private equity funds

The IVC-Online database contains data on 29 Israeli private equity management companies with total of $7.5 billion in capital under management. Of these firms, four were established during 2011.

For additional infOrmation, please visit: www.ivc-online.com or contact
Marianna Shapira, IVC Research Manager at +972-73-212-2339, marianna@ivc-online.com

About IVC: IVC Research Center is Israel’s leading research center providing business leaders with an unmatched wealth of data on Israel’s high-tech, venture capital and private equity industries. IVC products and services are used regularly by high-tech companies, venture capital and PE funds, private investors, financial investors and institutions, as well as public entities such as the Central Bureau of Statistics, the Bank of Israel and the Office of the Chief Scientist.

IVC owns and operates the IVC Online Database (www.ivc-online.com) containing over 8,500 Israeli high-tech companies, venture capital funds, investment companies, angels and technology incubators, as well as news updates and lots more. Among IVC products and publications are the IVC Quarterly Survey, which examines capital raising trends by Israeli high-tech companies, and the most comprehensive guide to Israeli high technology and venture capital – the IVC 2012 Yearbook due to be published in April 2012.

About GKH: Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co. is one of Israel’s leading corporate and securities law firms, providing superior and innovative legal services. GKH is engaged in all aspects of corporate and commercial legal practice, representing a large number of publicly held corporations traded on US, Israeli and European stock exchanges. The firm also represents international investment banks, privately held corporations of all sizes, newly formed businesses, partnerships and joint ventures. Clients comprise a broad range of industrial, commercial, energy, retail, transportation, financial and service enterprises, including the specialized businesses of telecommunications, banking, biotechnology, pharmaceuticals, electronics, software, real estate, research and development, commodities and venture capital. The firm’s expertise includes representation before government ministries, regulatory agencies and the Bank of Israel. The firm’s professional staff consists of over 100 professionals, including a large group of attorneys with US and UK licenses and work experience. GKH attorneys have served on several governmental advisory committees.