Israeli Private Equity Keeps Pace in Third Quarter, But Values Drop

Private equity deals in Israel fell dramatically in value if not in terms of pace in the third quarter, according to new data out of the IVC Research Center. Sixteen deals, valued at $272 million, were completed; in the second quarter of this year, 14 deals were sewn up at a collective value of $1.6 billion.

The vast disparity in value owes to the $1 billion buyout of software firm Paradigm Geophysical by Apax Partners and JMI Equity from Fox Paine in July.

Still, the amount of PE money put to work in the third quarter is also substantially off from this time last year, when $504 million was invested in 18 deals. In fact, the average deal in the third quarter was $17 million, or about 60 percent less than the $28 million per deal that Israeli companies averaged a year ago.

In a statement, Rick Mann, who co-heads the mergers and acquisition practice of the corporate law firm (and sponsor of IVC’s survey) Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co, attributed the somewhat lackluster numbers to the “processes of due diligence, evaluation and negotiation of private equity investments,” which “tend to be lengthy.” Not every quarter, added Mann, “will show a growth in PE activity.”

Overall, PE deals valued at $50 million accounted for just 6 percent of all deals in the third quarter, compared to 43 percent in the last quarter and 11 percent in the third quarter of 2011. Meanwhile, deals valued at less than $20 million accounted for 69 percent of the deals.

Broken down by sector,: communications deals accounted for 39 percent of deal value, owing to the buyout of the mobile infrastructure company StarHome by the Israeli private equity group Fortissimo last month for $80 million. The real estate sector followed with 19 percent, while “miscellaneous” accounted for 15 percent.

Most of the funding for the third quarter – 78 percent — came from Israeli PE funds, which is consistent with last year at this time, when 78 percent of the capital used for PE deals came from Israel-based firms.

For more information about the survey, click here.

Photo of Tel Aviv skyline courtesy of Shutterstock.