Private-equity deals at two-year high

Increase driven by Apax’s buyout of Psagot Investment House, according to survey conducted by the IVC Research Center.

February 14, 2011 23:36
3 minute read.

financial graph 311. (photo credit: stock photo)

The volume of private-equity deals rose to a two-year high in the last quarter of 2010, driven by Apax’s buyout of Psagot Investment House, according to a survey conducted by the IVC Research Center published Monday.

“2010 saw significant growth in private- equity transactions, reflecting increased confidence in the Israeli economy,” said Rick Mann, managing partner of Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co, a partner in the IVC-GKH quarterly private-equity survey. “Local Israeli funds continued to account for most of the transactions, but foreign funds are expected to play an active role going forward, particularly in the larger transactions.”

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Eleven private-equity deals were closed in Israel in the fourth quarter, representing an aggregate deal value of $769 million. This was the highest quarterly total in the past two years, and it mainly reflected Apax’s buyout of Psagot Investment House for $576m.

Deal value in the fourth quarter more than doubled compared with the previous quarter, during which a total of $290m. was generated, when 13 deals were closed, and was 590 percent above the $112m. deal value of the same quarter of 2009, when seven deals were completed.

During 2010, the volume of privateequity deals nearly tripled to $1.58 billion, when 51 deals were closed, up 210% from the $513m. in 2009, when 38 deals were closed. Apax’s buyout of Psagot accounted for 36% of the aggregate deal value in 2010.

“Israeli private-equity management companies are planning to raise new funds during 2011,” said Marianna Shapira, research manager at IVC.

“We expect capital raised for privateequity investments to reach $1.5 billion, which could boost investment activity and lead to growth in both the number and size of Israeli private-equity deals,” she said.

There are 26 Israeli private-equity management companies, which have total managed capital of $7b., according to the IVC online database. Included in the group are four Israeli private-equity funds that were established in the 2009- 2010 period.

In the last quarter of 2010, the financial sector was the most attractive area for private-equity funds, accounting for 77% of total deal value. The semiconductors sector followed with 8.5%. In the previous quarter, clean-tech attracted 41% of capital invested, followed by infrastructure (26%) and retail (15.5%).

In the fourth quarter of 2009, the most attractive sector was software, with 47% of total deal value, followed by the financial sector (24%) and life sciences (15%).

The financial sector was the most attractive for private-equity funds in 2010, with 39% of total deal value. The real-estate sector followed, with 10%.

The five largest Israeli private-equity deals accounted for 54% of aggregate deal value.

Apax led the top five, closing a buyout of Psagot Investment House for $576m.

Tene followed with a buyout of thermostat manufacturer Fishman Thermo for $85m. Israeli Infrastructure Fund (IIF) had the third-largest deal, with a buyout of toll highway operator Derech Eretz for $75m., which was followed by Ergasol’s $58m. deal with solar-systems installer Inbar Solar. The next largest was FIMI’s $50m. mezzanine financing of civil-engineering company Tahal.

Beresheit Fund led the 2010 ranking of the most active funds with eight first investments. KCPS followed with seven first investments.

FIMI had five investments, two of which were first deals and the rest follow- ons. Viola shared third place with FIMI, making four first investments and one follow-on. Overall, the real-estate and communications sectors attracted the largest number of investments in 2010, nine and eight deals, respectively, or 18% and 16%, of the total number of investments. The finance and software sectors each followed with five deals, or 10% of the total number of investments.

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