Private equity investment in Israel drops 67% in 2Q

$248 million, or 60% of total PE investments, was injected by foreign PE funds in Israeli firms, IVC report says

Shoshanna Solomon is The Times of Israel's Startups and Business reporter

Illustrative photo of foreign currencies. (Yossi Zamir/Flash90)
Illustrative photo of foreign currencies. (Yossi Zamir/Flash90)

Israeli and foreign private equity funds’ investment in Israel plunged in the second quarter of the year, with just $412 million injected in the quarter compared with $1.26 billion in the same quarter a year earlier.

The $807 million invested in 48 deals by private equity funds in Israel in the first half of the year was “sluggish” and was the lowest amount invested for that period in three years, a new report by IVC Research Center with Shibolet & Co. Law Firm showed. By comparison, these funds invested $1.5 billion in the first half of 2016 and $2.1 billion in the first half of 2015.

The drop was due to the funds being more cautious with their investment strategies, the authors said.

The largest PE deal in H1/2017 was the $140 million buyout of R2Net by Francisco Partners, while all the other deals during that period were some $50 million or less, said Omer Ben-Zvi, partner at Shibolet & Co. However, some major deals were reported in the third quarter, indicating a “stable activity” in the private equity market, with Israel continuing to be “a steady attraction” for overseas private equity firms, he said.

“We believe that although the market is cautious in terms of valuations, there are great Israeli opportunities for substantial private equity deals to come,” Ben-Zvi said.

In the second quarter of the year $248 million, or 60 percent of total PE investments, were invested by foreign private equity funds in Israeli companies, below the $1.1 billion invested in same period a year earlier, when foreign funds led with 87 percent of all PE investments. Even so, the figure was up from a mere $90 million, 23 percent of the total, invested in the first quarter of 2017, which was the lowest quarterly amount in three past years.

Francisco Partners made the largest deal among foreign PE funds in the second quarter of 2017 with the $140 million buyout of R2Net, which alone accounted for 57 percent of the foreign PE funds’ quarterly investments, the report said.

According to IVC, there are 41 Israeli private equity management companies currently active, managing a total of $13 billion in capital, with an estimated $1 billion available for new investments. In the first half of 2017, only Sky Private Equity III closed a capital round, raising $200 million; five other funds are in the process of raising capital, the report said.

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