Israeli Private Equity is experiencing some serious growth, according to the IVC-GKH Quarterly Private Equity (PE) Survey conducted by IVC Research Center. Private Equity is relatively less developed than VC in Israel but with deep pockets. There are 27 active private equity funds operate in Israel, with total managed capital standing at $6 billion in 2010. Large International PE funds have started to show interest in Israeli private equity, as evident by the recent entry of US private equity fund Silver Lake ($14 billion UAM). According to the survey, private equity deals in Israel have almost doubled in Q3 2010 compared to the previous quarter, reaching a value of $277 million in eight deals, compared to $146 million in the previous quarter which recorded eight deals as well.
Typically, these Israeli private equity funds and others invest in ‘old economy’ assets such as mid-tech manufacturing companies, healthcare and service industries. Most investments in the last few years have been into Israeli family/kibbutz-run businesses. But in Q3 2010, cleantech was the most attractive sector for private equity funds – representing 43% of total deal value. The infrastructure sector followed with 27%, and then the retail sector with 16%.
The average deal value in Q3 of 2010 also doubled, reaching $35 million, compared to $18 million in the previous quarter and $14 million in the third quarter of 2009. There are five typical types of financing in the Israeli private equity arena:
(1)buyout- One buyout deal valued at $75 million represented 27 percent of the aggregate deal value in Q3 2010, which compares with $48 million or 33 percent in Q2 2010 and $6 million or 3 percent in Q3 2009.
(2)mezzanine – One mezzanine financing accounted for $50 million, or 18 percent of the aggregate deal value, compared to $7 million (two deals) or 5 percent in the previous quarter, and $10 million (one deal) or 6 percent in Q3 2009
(3)distressed debt – One distressed debt deal accounted for $15 million, or 5 percent of the aggregate deal value, compared to $34 million (two deals) or 23 percent in the previous quarter. No distressed debt deals were reported in Q3 2009.
(4)turnaround/ distressed equity- no deals reported for this quarter.
(5) Straight equity – accounted for 50 percent of total deal value in Q3 2010, with five deals valued at $137 million. This compares to the $57 million (three deals) of Q2 2010, and the $164 million (10 deals) of Q3 2009. In Q3 2010, the average straight equity investment was valued at $27.5 million, compared to $19 million in Q2 2010 and $16 million in the third quarter of 2009.