The pace of deal activity in Canada’s private equity (PE) market slowed in dollar terms in 2018, according to a report by the Canadian Venture Capital and Private Equity Association (CVCA).
Disclosed PE deployments to some 543 deals totalled $22.3 billion last year, down 15 percent from $26.4 billion invested in 2017. Dollar values in 2018 were 62 percent higher, however, compared to 2016 values.
PE investment activity showed signs of recovery in Q4 2018, when values reached nearly $6 billion in all, or triple the amount on a quarter-over-quarter basis.
More than one-fifth of PE deals done in Canada in 2018 were located in industrial and manufacturing sectors, while IT sectors accounted for a 16 percent share.
CVCA’s overview of 2018 Canadian venture capital and private equity market trends can be viewed here.
CVCA 2018 PE Canadian Market Overview: Two Mega-Deals in Q4 Bring 2018 Total to $22.3B
Private equity investors support four IPOs in 2018
March 13, 2019
TORONTO–(BUSINESS WIRE)–Private equity investment in Canada bounced back in Q4 with dollars invested tripling from Q3 to $6B. This brings the 2018 year-end total to $22.3B over 543 deals—down 15% from the $26.4B invested in 2017 but 62% higher than the $13.8B invested in 2016.
There were two mega-deals ($1B+) in Q4 which brought the year-end tally to four deals worth $14.4B; 65% of total PE investment— a share that has doubled compared to the last three years. The combined value of mega-deals in 2018 exceeded the sum of all other PE deals. This hasn’t been seen since 2014 with the $11.8B acquisition of Tim Hortons.
The largest disclosed mega-deals in 2018 included the $5.1B recapitalization of GFL Environmental Inc. by a syndicate that included Ontario Teachers’ Pension Plan (OTPP), the $5B secondary sale of Husky Injection Molding Systems Ltd. by OMERS Private Equity Inc., and the $2.7B privatization of Mitel Networks Corp. by an investor group led by US-based Searchlight Capital Partners.
“Canada continues to be an attractive source of investment opportunities for both domestic and international investors,” says Kim Furlong, Chief Executive Officer, Canadian Venture Capital and Private Equity Association. “We will watch to see if the mega-deal trend in Canadian PE experienced last year will continue in 2019 or if we see a return to more conservative sizing.”
Just over one-fifth (22% or 118 deals) of PE deals in 2018 were in the industrial and manufacturing sector with information and communications technologies (ICT) companies receiving the second largest share (16% or 88 deals). The consumer and retail sector took an 11% share of deal flow (59 deals).
PE exits slowed in 2018 with only 82 exits including four IPO exits (worth $11.1B) compared to 2017 with 149 exits (totalling $11.6B). The companies that exited through IPO include Tilray, based in BC, with a market cap of $2.1B, Quebec-based IPL Inc., backed by Caisse de dépôt et placement du Québec (CDPQ) and Fonds de solidarité (FTQ) with a market cap of $709M, Ontario-Based MAV Beauty Brands with a market cap of $571M, and ONCAP-backed, BC-based Pinnacle Renewable Energy Inc. with a market cap of $370M.
Canadian Private Equity Highlights
A fourth-quarter recovery from its slump in the previous quarter saw PE investment triple to $6B, bringing the year-end total to $22.3B over 543 deals—down 15% from the $26.4B invested in 2017 but 62% higher than the $13.8B invested in 2016.
Two additional $1B+ mega-deals in Q4 brought the year end tally to four deals amounting to $14.4B or 65% of total PE investment, a share that has doubled compared to the prior three years. It’s worth noting that combined value of mega-deals in 2018 exceeded the sum of all other deals combined, a phenomenon that has not occurred since 2014 driven by the blockbuster $11.8B acquisition of Tim Hortons. The largest disclosed mega-deals included:
$5.1B recap of GFL Environmental Inc. by a syndicate that included Ontario Teachers’ Pension Plan (OTPP)
$5B secondary sale of Husky Injection Molding Systems Ltd. by OMERS Private Equity Inc.
$2.7B privatization of Mitel Networks Corp. (dually listed on TSX and NASDAQ) by an investor group led by US-based Searchlight Capital Partners
Deal activity in the small end of the market segment (deals less than $25M) garnered 68% of all deals, higher than last year’s 60% share. Deals between $25M-$100M captured an 8% share of deals, down from the 11% last year.
26% (98 deals totalling $2.6B) of all PE deals went to Montreal-based companies, with Toronto-based companies receiving a 20% share (78 deals totalling $11B).
A little over a fifth (22% or 118 deals) of PE deals this year have been closed in the industrial and manufacturing sector, with ICT companies receiving the second largest share (16% or 88 deals). The consumer and retail sector garnered a 11% share of deal flow (59 deals).
Corporate appetite for debt continued with four out of every 10 deals being PE debt with the average deal size of $8.5M dropping 15% from last year.
The pace of PE exits slowed with only 82 exits, four of which were IPO exits (totalling $11.1B), compared to last year with 149 exits (totalling $11.6B):
Tilray, based in BC, completed its IPO on NASDAQ with a market cap of $2.1B
Quebec-based IPL Inc., backed by Caisse de dépôt et placement du Québec (CDPQ) and Fonds de solidarité (FTQ), completed its IPO on TSX with a market cap of $709M
Ontario-Based MAV Beauty Brands completed its IPO on TSX with a market cap of $571M
ONCAP-backed BC-based Pinnacle Renewable Energy Inc. completed its IPO on TSX with a market cap of $370M
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