Canadian PE activity slows in H1 with $14.8 bln invested: CVCA


Photo courtesy of Madmaxer/iStock/Getty Images

The investment pace in Canada’s private equity market continued to slow in the first half of 2018, according to a report by the Canadian Venture Capital and Private Equity Association (CVCA).

A total of $7.6 billion was invested in 146 PE deals in the second quarter, bringing the year-to-date total to $14.5 billion over 288 deals.

Two mega-deals took 69 percent of dollars invested at the end of June. They were the $5.1 billion recapitalization of GFL Environmental Inc and the $4.9 billion acquisition of Husky IMS International Ltd.

More than one-fifth of PE deals in the first half were closed in the industrial and manufacturing sector, while the information technology sector accounted for 16 percent.

CVCA’s overview of H1 2018 Canadian venture capital and private equity market trends can be viewed here.

PRESS RELEASE

CVCA H1 2018 PE Canadian Market Overview: All Segments Slowing With Overall Activity Eclipsed By Two Mega Deals

Mega deals in H1 doubles its share compared to the three previous years

August 23, 2018

TORONTO–(BUSINESS WIRE)–Private equity investment in Canada continued its downward trend in the first half of 2018. $7.6B was invested over 146 PE deals in Q2, bringing the year-to-date (YTD) total to $14.5B over 288 deals. So far in 2018, overall investment was bloated by two mega deals ($2.5B+) which made up 69% of total dollars invested. In comparison, mega deals made up only 51% of dollars invested in H1 2017 and 0% in H1 2016.

The two mega deals accounted for three quarters (69%) of YTD investment in 2018 and included the $5.1B recapitalization of Ontario-based GFL Environmental Incorporated by a consortium which included Ontario Teachers’ Pension Plan (OTPP) and the OMERS Private Equity sale of its position in Husky Injection Molding Systems Limited to a U.S. PE firm via a $5B secondary buyout.

“Canadian private equity appears on pace from previous years, however on the dollar side it is increasingly driven by significant deals; suggesting the levels are a bit more tenuous,” says Mike Woollatt, Chief Executive Officer, Canadian Venture Capital and Private Equity Association. “In the absence of a few large deals, activity in the Canadian PE market is being driven substantially by smaller deals as activity shifts to categories with typically smaller deal sizes.”

The momentum in exits also shifted downward in H1 with only 41 exits ($10.5B) compared to 152 exits ($11.5B) in 2017. There were two IPO exits which included Quebec-based IPL Incorporated (TSE: IPLP) with a market cap of $709M, backed by Caisse de dépôt et placement du Québec (CDPQ), Fonds de solidarité (FTQ) and Investissement Québec and ONCAP-backed BC-based Pinnacle Renewable Energy Incorporated (TSE: PL).

Canadian Private Equity Highlights

$7.6B was invested over 146 PE deals in Q2 2018 bringing the YTD total to $14.5B over 288 deals.
Two mega deals accounted for a lopsided share of investment (69%) in the first half of 2018—more than double the one-third share mega deals have typically captured in any of the three previous years:
the $5.1B recapitalization of Ontario-based GFL Environmental Inc. by an investor consortium that included Ontario Teachers’ Pension Plan (OTPP)
OMERS Private Equity selling its stake in Husky Injection Molding Systems Ltd. to a US PE firm via a $5B secondary buyout
Propelled by the Husky deal, the amount invested in secondary buyouts has already exceeded the total for each of the last five years.
Deal activity in the small end of the market segment (deals less than $25M) garnered 65% of all deals, higher than last year’s 60% share. Deals between $25M-$100M captured a 7% share of deals, down from the 11% last year.
17% (50 deals totalling $1.9B) of all PE deals went to Montreal-based companies, with Toronto-based companies receiving a 14% share (41 deals totalling $10.5B).
A little over a fifth (22% or 64 deals) of PE deals this year have been closed in the industrial & manufacturing sector, with ICT companies receiving the second largest share (16% or 45 deals).
The pace of PE exits slowed with only 41 exits (totalling $10.5B) compared to last year with 152 exits (totalling $11.3B) with two IPO exits:
Quebec-based IPL Inc., backed by Caisse de dépôt et placement du Québec (CDPQ), Fonds de solidarité (FTQ) and Investissement Québec, completed its IPO on TSX with a market cap of $709M
ONCAP-backed BC-based Pinnacle Renewable Energy Inc. completed its IPO on TSX with a market cap of $370M

Digital Resources

H1 2018 VC & PE Canadian Market Overview

About the CVCA

The CVCA is the voice of Canada’s venture capital and private equity industry. We are focused on improving the private capital ecosystem by broadening industry awareness and providing market research, networking, and professional development opportunities. We also advocate on behalf of the industry to ensure sound public policy that encourages a favourable investment environment. The CVCA works alongside its members, who represent the vast majority of private capital firms in Canada, to improve the industry and drive innovation and growth. Please visit: http://www.cvca.ca.

Contacts
CVCA
For more information or to arrange an interview, please contact:
Jon Jackson, 416-487-0519, ext. 201
Manager, Content and Media
jjackson@cvca.ca