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Private Equity in Israel - where we were, where we are and where we might be headed
Presenter: Jonathan Kolber – General Partner, Viola Private Equity |
About the speaker:
In January 2008 Jonathan joined Viola Private Equity as a General Partner. Previous to this, Jonathan served as Chairman of Anfield Ltd., a family holding company. Anfield invests in hedge funds and private equity deals, including Lumenis (a Viola transaction) and Eyeblaster (a New-York / Israeli digital advertising company) where Jonathan serves as a lead investor and active board member. Jonathan is temporarily in New York with his family where he is also consulting to Alternative Investment Management, LLC a fund of funds controlled by the J. Ira Harris and Pritzker families.
From July 2006 to August 2007, Jonathan was Chairman of the Board of Koor Industries Ltd. (TASE:KOR), a holding company that focuses on investments in internationally-oriented Israeli companies. Prior to this, he served for eight years as Koor's CEO. Koor owns a controlling interest in Makhteshim Agan Industries (TASE:MAIN.TA), the world's largest producer of off-patent crop protection products.
From 1988 until 1998, Jonathan was President and CEO of Claridge Israel, the private investment company of Montreal-based Charles R. Bronfman and his family. Claridge Israel pioneered private equity investing in Israel, was among the first large scale foreign investors in Israel, and provided private equity and mezzanine financing for companies such as ECI Telecom (NASDAQ:ECIL), TEVA (NASDAQ:TEVA), Optrotech and Osem (TASE:OSEM).
Previously, Jonathan worked as a financial analyst in the Canadian finance group at Salomon Brothers Inc. from 1983 to 1985. He then joined Cemp Investments Ltd., a financial holding company and the precursor to Claridge Inc. (Montreal), first as an investment officer and later as a vice president in 1986.
During the years, Jonathan was a member of the boards of directors of a number of Israeli companies, including: ECI Telecom Ltd., Makhteshim-Agan Industries Ltd., Telrad Networks Ltd., Sheraton Moriah (Israel) Ltd. and Epsilon Investment Bank Ltd.
Jonathan earned a BA (Cum Laude) in Near Eastern Languages and Civilizations from Harvard University. As part of his studies, Jonathan lived in Egypt for one year where he received a certificate in advanced Arabic from the American University of Cairo. Jonathan is the Chairman of the Association of Friends of the Tel Aviv Sourasky Medical Centre (Ichilov Hospital) and a member of the Executive Board of the Peres Centre of Peace.
RECAP OF NOVEMBER 6 EVENT
In his presentation, "Private Equity in Israel - where we were, where we are and where we might be headed," Jonathan Kolber shared with IBF members his views on private equity in Israel as well as on how should a good manager lead and navigate a private enterprise during changing and often challenging circumstances, using insightful examples from his extensive managerial experience. Of particular interest were Kolber's insights as to what (if any) we can learn from the past to successfully withstand the current global financial crisis.
Comparing between the Hi Tech Bubble Crisis of 2002 and the current ongoing global financial crisis, Kolber stressed that the key difference between the 2002 crisis and the crisis today is that in 2002 "toxic assets" were concentrated and effectively contained in the Hi-Tech and Telecom industries leaving other industries such as chemicals, chemistry and real estate unharmed (and therefore with opportunities to pursue), whereas in the current crisis no industry or segment of the global markets is spared, making the current crisis a much more difficult crisis to prepare for and withstand. Kolber believes "there is nowhere to hide" in the current crisis.
Kolber stressed that the key to successfully withstanding the current global financial crisis is a clear and solid crisis management plan. As an example, Kolber discussed how Tadiran was taken private during the 2002 Hi-Tech Buble Crisis using a well planned crisis management plan. The first step of any effective crisis management program is to carefully study the company's balance sheet and to draw from it a well thought restructuring program. Equally important is a discrete and intelligent execution of the plan. In the example of Tadiran, 7,000 employees were laid off and this was only achievable thanks to a well planned crisis management program. In addition, the company's headquarters were relocated from Tel-Aviv to Rosh Haayin resulting in significant savings. Kolber emphasized that a key element in executing a crisis management program is to keep management, shareholders and employees well informed and part of the process at all times.
As to taking companies private in general, Kolber noted that an important element that, in his experience, has a significant effect on transactions is specific situations and changing circumstances which often lead management to taking action (more so than someone's planned initiative). A good example is the sale of Koor to IDB. Prior to such sale, Koor was very healthy and did not carry any debt. The main shareholders wanted Koor to remain in such position whereas the Board members believed it was more prudent to pursue growth opportunities that involved incurring debt. Kolber's solution to this situation was to suggest putting Koor for sale with the goal of seeking a new controlling shareholder who will share the view of the board re: growing the business. This lead to the sale of Koor to IDB.
Kolber also discussed his current Private Equity Fund – Viola – as well as the Venture Capital industry in Israel in general. Viola's concept is to build a private equity nish in Israel which is post Venture Capital. Kolber's believes that to date Venture Capital has failed as an asset class in Israel. Of the 60 Venture Capital funds that existed in Israel about 10 years ago, there are only about 20 Venture Capital funds left today and of them only 3 Venture Capital funds have provided a positive return. Kolber believes that private equity funds concentrating on the post Venture Capital stage are the future of private equity.
Kolber concluded his presentation by noting that the current global financial crisis is unprecedented. It creates opportunities for significant gains while at the same time an enhanced risk for significant losses.
