Study: Israeli deal flow down

Israeli deal flow and deal volume dropped during 2012, but the IVC Research Center expects activity to pick up this year as domestic firms are planning to put their recently raised capital to work.

Private equity deal flow in Israel fell starkly in 2012, with just 46 completed deals compared to 63 in 2011, a study has found. 

Deal volume dropped to $2.6 billion from $2.9 billion in 2011, according to research by the IVC Research Center and GKH, an Israeli law firm. The combined investments by domestic private equity funds also dropped to $530 million, down from $963 million in 2011. 

The average deal size in 2012 was $56.2 million, compared to $45.6 million in 2011. However, this was blurred because of the $1 billion buyout of software firm Paradigm Geophysical by Apax Partners and JMI Equity, which accounted for 39 percent of total annual deal value, according to the IVC Research Center.  

The Israeli economy is very much influenced by the global economy, according to Marianna Shapira, research manager at the IVC Research Center, so “maybe 2012 was a bit rough”, she said. But in general, the Israeli private equity market “has its fluctuations so you can’t really make comparisons from year to year”, she said. 

The largest private equity deal by an Israeli fund was the $45 million turnaround deal of Phoenicia Glass Works, a manufacturer of glass container, by Fortissimo, the study said. 

Deal flow is expected to pick up this year, according to Shapira. “There are large private equity capitalists that have raised money during 2012. The largest ones are FIMI who raised around $820 million – [which is the] largest amount in Israeli history when it comes to private equity, and Fortissimo [which] raised more than $200 million. They are planning investments [for this year],” she said. In addition, international private equity funds are also increasingly active in Israel, she indicated. 

Software deals were the most popular last year, according to the data. The technology market is one of the most attractive sectors in Israeli private equity as many companies are starting to mature and are looking to expand internationally, according to Shapira.