More dollars flow to fewer Canadian PE deals in 2016’s first half

Canadian private equity investment showed mixed results in the first half of 2016, with 145 deals (announced and closed) capturing $10.1 billion in disclosed values, according to data released by Thomson Reuters. Dollar flows in Canada in this period were up 30 percent from the first half of 2015, while the number of deals dropped 29 percent. Canadian investors were also less active around the world, joining a comparatively few 47 global PE deals valued at $36 billion in the first half. Despite the decline in deal-making, Canadian buyout and other private equity funds raised a hefty $39.1 billion in committed capital between January and June, led by multiple fund closings by Brookfield Asset Management.

A full PDF report of Q2 2016 Canadian buyout and related private equity market activity by Thomson Reuters is available here.

REPORT SUMMARY (reproduced courtesy of Thomson Reuters)

Canadian buyout-PE market trends

Deal-making activity in Canada’s buyout and related private equity (PE) market showed mixed conditions in the first half of 2016 with increased deal values and declining deal volumes. A total of $10.1 billion was invested in 145 deals as of June 30th, which in dollar terms was up 30% from the same period the year prior and the most dollars invested in a first half since 2007. Deal volumes however were down by 29% from the first six months of 2015, marking the fewest companies funded in a first half since 2010.

Canadian private equity deal volumes were also down as compared to conventional merger & acquisition activity of Canadian targets. As the number of M&A deals completed in the first half was only down 16% from the same period a year ago, private equity has been seeing a greater decline in deal volumes as compared to alternative markets.

Top deals included CDP Capital’s $2.0 billion investment in Bombardier Transportation, Thomas H. Lee Partners’ investment in Give & Go Prepared Foods for $1.0 billion, and CPPIB’s $1.0 billion investment in Tiene Energy. At the end of June, the ten largest transactions captured 78% of all disclosed disbursements made in the Canadian market.

Canadian market trends by sector

Canadian oil & gas, mining, and consumer related companies each tied for the largest share of buyout-PE dealmaking in the first six months with 20 transactions apiece. Following a close second were manufacturing companies, with 16 deals, while software and healthcare-related companies each came in third with ten transactions.

As measured by disclosed deal values, oil & gas companies continued to place first, unchanged from 2015, with a combined $3.1 billion. The manufacturing sector placed second with $2.2 billion in disclosed deal values, while the Consumer sector placed third with $1.5 billion.

Canadian market trends by region

The majority of buyout-PE transactions (announced and completed) in the Canadian market in the first half involved businesses that were located in Québec (45%) and Ontario (28%).  However, only the province of British Columbia demonstrated any growth over the first six months of 2015, with 15 deals this year, an 88% increase. The number of deals done declined substantially in Québec (by 30%), Alberta (by 31%), and Ontario (by 39%).

Though the number of deals done in Ontario declined in the first quarter, the province attracted the bulk of the largest deals, securing $3.8 billion. Alberta-based companies attracted the second largest share, with $2.8 billion, while Québec followed with $2.6 billion. Though British Columbia saw growth in its number of deals in the first half, most had undisclosed values, leaving the province with only $724 million of disclosed disbursements.

Canadian investor activity in global markets

Canadian buyout and related PE funds were substantially less active in international transactions in the first half relative to the year before. As of June 30th, Canadian funds led or participated in a total of 47 deals in other countries, and these were valued at approximately $36 billion. This compares against a total of 76 deals valued at $65 billion reported in the first half of 2015. Topping the list was Florida-based security services provider ADT, which was acquired for $8.7 billion by PSP Investments.

Trends in Canadian buyout-PE fundraising

The fundraising activities of Canadian buyout funds maintained very strong levels in the first half of 2016 with a total of $39.1 billion of new capital committed, led by the closings of Brookfield Capital Partners IV and Brookfield Infrastructure Fund III.

Photo courtesy of Thomson Reuters/Carlo Allegri