Israeli PE deals decline by 27%

Foreign GPs like Oaktree continue to close the country’s largest deals, which were valued at $606m in Q3

Activity in Israel’s private equity market has slowed since 2013, according to data from IVC Research Centre published in partnership with GKH law firm.

Capital deployed in the Israeli market dropped 27 percent quarter-on-quarter; 11 deals were done in the third quarter, valued at $606 million, down from $835 million spent on 21 during the same period last year. The research noted it was the lowest quarterly total in four years.

Cumulative figures for the first three quarters were also down by 27 percent, with $1.2 billion invested across 51 deals this year, compared to $1.7 billion invested in 58 transactions during the first three quarters of 2013.

The biggest deal in the third quarter – the $475 million purchase of water and energy management company Veolia Israel – was signed by global private equity firm Oaktree Capital and accounted for 78 percent of deal activity in the third quarter.

The fact that a foreign firm has accounted for so much of the country’s dealflow is not a new phenomenon, according to Rick Mann, managing partner of GKH.

“Israeli private equity funds tend to be the most active in the Israeli market, but foreign private equity funds are generally behind the larger size transactions. The quarterly data tends to be influenced by one or two large transactions, and that is a pattern we expect to see,” he said in a statement.
Israeli private equity funds invested $114 million during the third quarter, making up just 19 percent of the total invested. That’s a drop from $325 million during the same period last year. The amount invested across all three quarters, $518 million, is on par with last year’s $518 million figure, however, this year the third quarter accounted for only 11 transactions, half as many as in 2013.

Buyout transactions were the most prevalent deal type during the third quarter this year, a change from the pure equity deals that comprised 100 percent of all deal activity in the previous quarter. This is likely to do with the industries in which deals were agreed, said Marianna Shapira, IVC researcher.

“Straight equity deals tend to be directed to technology companies, while buyouts and other mechanisms are used mostly in non-technology deals,” Shapira said in a statement.