Blackstone in advanced negotiations to acquire Priority Software in $400-500 million deal
Blackstone in advanced negotiations to acquire Priority Software in $400-500 million deal
Blackstone is set to purchase 60-80% of the shares of Priority, which operates in the field of enterprise software (ERP), from current owners - Israeli private equity fund Fortissimo and American investment fund TA Associates
Blackstone, the world's largest alternative asset manager, is in advanced negotiations to acquire control of Israeli company Priority Software in a deal valued at $400-500 million, Calcalist has learned. If the deal is signed, Blackstone will acquire 60-80% of the shares of Priority, which operates in the field of enterprise software (ERP).
Currently, the company is owned by the Israeli private equity fund Fortissimo (50%), managed by Yuval Cohen, and the American investment fund TA Associates. TA Associates acquired 50% from Fortissimo in 2020 at a company value of $250 million. After TA's entry, Priority made a series of purchases of other companies worth approximately NIS 400 million (approximately $107 million). The total volume of purchases made by the company since Fortissimo acquired it in 2013 is NIS 800 million ($215 million).
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Senior Managing Director at Blackstone Yifat Oron (right) and Managing Partner of Fortissimo Capital Yuval Cohem.
(Photo: Amit Shaal and ValueX)
Managed by Sagive Greenspan, Priority operates in software development for managing organizational resources. It offers software that enables companies to manage all their needs, from finances to human resources and procurement. The company serves 75,000 customers in 70 countries, operating with partners in nine countries. Currently, Priority employs about 500 people, including 180 at the company's headquarters in Afek Park and its development center in Jerusalem. Additionally, it has offices in the U.S., UK, and Belgium.
Priority is considered the largest player in Israel in the market segment of small and medium businesses, with approximately 10,000 customers in Israel. Fortissimo led the company to expand abroad, and today overseas sales make up about 50% of its revenues.
Fortissimo purchased the company in a tender at the end of 2013 for 192 million shekels (about $38 million). After the company went into insolvency, Fortissimo financed the acquisition through bank credit. Since then, Fortissimo has paid off the full debt and has drawn dividends amounting to tens of millions of dollars over the years.
Ashbel Technologies, established in 1986, was a fairly successful company at the time, but its founder and CEO Yossi Shaham, along with his partner Nava Enosh, lost the company due to entanglements with the law. As part of a plea deal with the Tax Authority, the two admitted to tax evasion amounting to hundreds of millions of shekels, as well as false reports and the misuse of the company's funds for personal needs. According to the court's decision, the company was required to pay taxes amounting to more than 100 million shekels, which led it to insolvency. The sum paid by Fortissimo was used to settle debts with the tax authority and settle employee claims.
Priority's growth was carried out by Fortissimo through acquisitions of companies that introduced it to new market segments. As mentioned, the total scope of purchases amounted to NIS 800 million. In 2018, Priority purchased the Belgian Optimize Group, which also operates in the ERP field, for approximately 8 million euros. It previously also acquired US-based Acclivity in 2018, Israel-based Monitin Information Systems' ERP activity in 2017 and US-based ERP consulting and services firm, Performa Apps in 2016.
The volume of transactions and their pace increased after TA Associates entered as a partner in the company. Within about a year and a half, Priority made purchases for NIS 400 million. Thus, in February 2021, it acquired Israel-based Edea, a company specializing in software solutions for the retail industry, which employs 100 employees, for 142 million shekels. In October of the same year, it acquired Ovdimnet, which develops a system for employee management and budget control, for 40 million shekels, and two months later, the Mashov school management system for 50 million shekels. In April 2022, Priority purchased SoftSolutions, which develops smart platforms for organizational management, with an emphasis on logistics centers, for NIS 50 million. Another major purchase was Silverbyte, which developed software that provides various management solutions for the hospitality sector, used by hotel chains to manage the entire guest interface. The company employed 50 employees at the time and was purchased for NIS 120 million.
Blackstone manages assets amounting to 1.06 trillion dollars (as of the end of the first quarter of 2024), making it the largest private equity fund in the world in terms of assets under management. Blackstone is traded on the New York Stock Exchange (NYSE) with a market capitalization of $145 billion.
In April 2021, Blackstone opened an office in Israel for the first time, in Tel Aviv, and appointed Yifat Oron, who was previously the CEO of LeumiTech, as Senior Manager Director and the head of local operations. The chairman of the local office is Dan Gillerman, who was the representative of the American giant in Israel previously.
Since Blackstone opened its Israeli office, it has not made any major investments in the country, certainly not its classic type of deals when it acquires control of large companies or turns them private. It has, however, participated in several funding rounds of startups. Nevertheless, should the acquisition of Priority be completed, it will be Blackstone's first really significant deal in Israel.
In October, a few days before the outbreak of the war, Blackstone led the Series D round of the Israeli fintech company Stampli, which deals in the field of payment automation, in the amount of $61 million. In May 2021, Blackstone made its first venture capital investment in Israel - in the cybersecurity company Wiz, founded by Assaf Rappaport and Adallom veterans. Existing shareholders sold shares for $120 million to Blackstone and Salesforce as part of the secondary deal. Beyond that, Blackstone also invested in the Israeli technology companies Cloudinary and Pentera.
