The pace of dealmaking in Canada’s private equity market slowed in the first quarter of 2018, with a total of $6.5 billion invested in 137 transactions, according to a report by the Canadian Venture Capital and Private Equity Association (CVCA). CVCA found few $100 million-plus deals in this period, apart from the buyout of Husky IMS International Ltd. Deals sized less than $25 million took the largest share of PE activity in Q1 2018, or 61 percent. The industrial and manufacturing sector led trends between January and March, accounting for 21 percent of deals, while the information and communication technology sector captured a 15 percent share.
CVCA’s overview of Q1 2018 Canadian venture capital and private equity market trends can be viewed here.
CVCA Q1 2018 PE Canadian Market Overview: Single Mega-Deal Dominates Quarter With All Other Segments Slowing
The $5B buyout of Husky Injection Molding Systems Ltd. accounted for three-quarters of total PE investment in Q1 2018
May 29, 2018 – Toronto, ON – Canadian private equity investment activity experienced a slower quarter in Q1 2018 with $6.5B invested over 137 deals. $5B of that total was from the buyout of Husky Injection Molding Systems Limited with participation from CVCA member OMERS Private Equity Incorporated. This deal aside, there is a significant cooling in activity in the first quarter of 2018, with no deals between $500M-$1B and only 4 deals between $100M-$500M.
61% of all deals in the first quarter of the year were in the small end of the market segment (deals less than $25M) which was equal to last year’s share. Only a 7% share of deals were closed in the small-to-mid market ($25M-$100M), compared to the 11% share in 2017.
21% of private equity deals in Q1 2018 were closed in the industrial and manufacturing sector, with 15% in the information and communications technology (ICT) sector.
“With valuations continuing to climb, the larger buyout side of Canada’s private equity activity is experiencing a slowdown,” said Mike Woollatt, CEO, CVCA. “While there is still a lot of activity on the growth equity side, many buyout firms appear focused on selling versus buying in the Canadian market.” The pace of private equity exits also slowed, with only 24 exits in the first quarter of the year (totalling $8.7B) compared to 2017 with 152 exits (totalling $10.8B).
Private Equity Highlights:
• $6.8B was invested over 137 PE deals in Q1 2018, although three quarters of that amount was a single mega-deal—the $5B secondary buyout of Husky Injection Molding Systems Ltd.
• Excluding that single-mega deal, the first quarter was relatively bleak with no deals between $500M-$1B and only 4 deals between $100M-$500M.
• Propelled by the $5B Husky deal, the amount invested in secondary buyouts has already exceeded the total in each of the last five years.
• Deal activity in the small end of the market segment (deals less than $25M) garnered 61% of all deals, equal to last year’s share. Deals between $25M-$100M only captured a 7% share of deals, down from the 11% last year.
• 20% (27 deals totalling $594M) of all PE deals went to Montreal-based companies, with Toronto-based companies receiving a 12% share (17 deals totalling $5.3B).
• A little over a fifth (21%) of PE deals this year have been closed in the industrial and manufacturing sector with ICT companies receiving the second largest share (15%).
• The pace of PE exits slowed with only 24 exits (totalling $8.7B) compared to last year with 152 exits (totalling $10.8B):
o Pinnacle Renewable Energy Inc. (TSX: PL) was the lone IPO, going public on TSX with a market cap of $370M.
• Q1 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.
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