from the February 2017 issue

Heading for a Banner Year for Hi-Tech

Private equity investment in Israel was $3.5 billion last year, up from $3.1 billion in 2015.

In 2016 Israeli and private equity funds invested a record $3.5 billion in 68 deals, up 14% from just under the $3.1 billion in 2015 and 29% up from $.2.73 billion in 2014. The number of deals however, dropped 17% in 2016 down from 103 deals in 2015, and 17% below the five year average of 82 private equity deals. This year, from all indications, is heading for a banner year.

The four largest deals closed in 2016 were all buyouts above $100 million each, accounting for $2.54 billion or 72% of proceeds. The buyout of Keter Plastics by BC Partners $1.4 billion - the largest private equity deal recorded in five years - was followed by the $643 million buyout of of Xura by Siris Capital. In third place was the $400 million buyout of Sintec Media by Francisco Partners, while FIMI carried out a $100 million buyout of G4S Israel.

In line with developments in the US, Israel experienced a substantial decrease in the number of private equity investment deals during 2016. This is in line with the decline in the US private equity market. However, the 2016 annual private equity deal amount - the highest ever recorded - was encouraging, as was the stable activity of foreign PE funds with another annual record. Another strength sign is the continued activity of the private equity technology sector. We therefore believe it is too early to conclude that we are witnessing the beginning of a slowdown in the Israeli private equity industry. Positive signs are being seen in the continued fundraising by venture capital funds focusing on the Israeli high-tech industry and the increasing number of growth opportunities, as well as fundraising by Israeli PE funds and foreign PE funds expressing interest in Israel.

In the fourth quarter of 2016, Israeli private equity deal-making decreased, as 16 private equity deals accounted for $412 million, 46% below the $757 million invested in 25 deals in the fourth quarter of 2015, and a 74% drop from the $1.6 billion invested in 14 deals in the previous quarter. Both the amount and number of deals were below the five-year average, a decrease of 38% and 24%, respectively.

Technology deals kept a strong momentum in PE deals, with 44 transactions performed in 2016, the same as the five-year average, accounting for 65% of the deals, and generating $1.61 billion, or 46%, of capital volume. Two of the top buyouts mentioned - the Xura and Sintec Media deals, contributed.

Reprinted from the Israel High-Tech & Investment Report February 2017

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