In the first half of 2013, 17 Israeli private equity deals attracted USD939m, a decrease of 48 per cent from USD1.8bn attracted in 26 deals in H1/2012, according to the latest quarterly survey by IVC and GKH.
The largest transaction was the USD500m buyout of tire manufacturer Alliance Tire Company by KKR, a foreign private equity fund. The average deal in H1/2013 was valued at USD55m, compared to USD69m in H1/2012.
In Q2/2013, nine Israeli private equity transactions were valued at USD722m, compared with just USD217m invested in eight deals in Q1/2013. Second quarter activity, however, was down 58 per cent from Q2/2012 when USD1.701bn was invested in 17 transactions. Alliance Tire’s USD500m buyout captured 69 per cent of total quarterly deal value. The average deal in Q2/2013 was valued at USD80m, compared to USD27m and USD100m in Q1/2013 and Q2/2012, respectively.
In the first half of 2013, Israeli PE funds made investments of USD182m — 19 per cent of total investments. This compares with USD252m or 14 per cent of all PE activity in H1/2012.
In Q2/2013, Israeli PE fund investments accounted for USD90m or 13 per cent of total transactions. The amount is just short of the USD92m invested in the previous quarter, when Israeli funds accounted for 42 per cent of all investments. In Q2/2012, Israeli PE funds invested USD209m, which comprised just 12 per cent of investments. The largest transaction in Q2/2013 was the buyout of aerospace manufacturer TAT Technologies by FIMI for USD35m. The transaction accounted for 39 per cent of all PE activity by Israeli funds in the quarter.
Rick Mann, partner and head of M&A at GKH, says: "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."
In the first half of 2013, the industrial sector accounted for the largest share of deal value with 58 per cent, followed by the retail sector with 18 per cent, cleantech with 13 per cent and services with seven per cent. No software deals were made in H1/2013 in contrast to the same period in 2012 when software accounted for a 60 per cent share of investments.
In Q2/2013, the industrial sector led investments for the first time in three years, capturing 75 per cent of deal value, mostly due to the Alliance Tire buyout. No deals in this sector occurred in the previous quarter, and in Q2/2012 the sector accounted for just two per cent of deal value. Retail sector transactions followed with 17 per cent, while services, financial and cleantech sector investments combined to account for the remaining eight per cent.
In H1/2013, eight buyout deals accounted for USD739m or 79 per cent of total transaction value. This compares to 10 buyouts which attracted USD1.5bn or 85 per cent in H1/2012. Seven straight equity deals followed with USD170m or 18 per cent, while mezzanine deals attracted the remaining three per cent.
In Q2/2013, five buyout deals attracted USD664m, 92 per cent of total transaction value. The largest buyout was the USD500m acquisition of Alliance. Buyouts accounted for 34 per cent and 87 per cent of deal value in Q1/2013 and Q2/2012, respectively. Four straight equity deals captured USD58m in Q2 — the remaining eight per cent of total deal value. The largest straight equity deal was by foreign PE fund Fidelity Group, which invested USD28m in supermarket chain Rami Levy.
The IVC-Online Database maintains data on 25 active Israeli private equity management companies with a total of USD7.2bn under management. In the first half of 2013, five Israeli private equity funds raised USD676m.
Marianna Shapira, research manager at IVC, says: "The current year looks encouraging for Israel’s private equity industry, as almost USD700m has already been raised by Israeli private equity funds and another USD1bn 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 favoured sectors — infrastructure, cleantech and real estate — should be marked as primary targets of investment."
