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Israel Shows Strong Private Equity Performance in First Sector

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May 15, 2014

Private equity in Israel bounced back from a less stellar than expected 2013 with a strong first quarter 2014 performance. Jewish and Israeli news source The Algemeiner reported that total investment in the country across the first quarter totalled $349million, representing a massive 141% year on year increase against 2013’s $145million worth of investments. The total sum invested was an also an increase on the fourth quarter of 2013, which saw $231million of deals concluded in the country.

 

These numbers are clear confirmation that confidence has returned to private equity following a short period of uncertainty related to Israel. Crucially, the number of deals and the average deal value is also increasing. Another positive sign for the Israeli private equity marketplace is that Israeli funds contributed 58% of the first quarter investments.

 

Although this is a significant 21% fall against the three year average, this is more a sign of the significant sums coming into Israel from abroad, and is nearly treble the domestic investment in the fourth quarter of 2013. To date in 2014, the largest deal in Israel has been Francisco Partners’ buyout of NSO Group Technologies, with a deal value of $115million.

 

The Algemeiner also reported that the Globes Business Daily noted two further deals that both exceeded the $50million mark. The largest Israeli deal saw Tene Investment Funds acquire Gadot Chemical Tankers and Terminals for $73billion.

 

These deals are all likely to be dwarfed in the coming weeks or months by Bright Food’s planned acquisition of Tnuva Food in the country. The story was reported by DealMarket Blog here in early May, while Globes have also reported this week that the deal is nearing completion, with Bright Food admitting they are looking forward to introducing Tnuva’s range of products to the Chinese marketplace.

 

Bright Food’s marketing director told the Globes website, “Tnuva is a great food company. Many of its products are suitable for the Chinese market, and if the deal is finalized, we will be able to import Tnuva cheeses to China. The flavour of cheese in Israel is different from Europe, and it is better, in my opinion.” This deal is expected to value Tnuva at almost $2.5billion, with the stake acquired by Bright Food likely to be worth well in excess of $1.25billion.

 

Overall, the sentiment in Israel is positive, with Rick Mann of Gross, Klienhendler, Hodak, Halevy, Greenberg & Co. (GKH) telling The Algemeiner, “The Israeli M&A market continues to show signs of strength, and we have seen increased competition between private equity players and strategic acquirers.

 
“Hesitation by local banks in offering acquisition financing may be making it more difficult for those potential acquirers seeking to leverage their transactions. Israeli private equity funds continue to be a strong force in the market, and we may see more private equity funds targeting the local market.”
GKH worked alongside the IVC Research Center to produce the data, which also demonstrated that domestic Israeli funds raised almost $400million in the first quarter of 2014.

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