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Canadian PE deal-making YTD robust at home and abroad

Canadian buyout and related private equity deal-making was robust in the first three quarters of the year, despite a slower Q3 2015, according to final data released by Thomson Reuters. Disclosed deal values hit $16.1 billion at the end of September, a result that exceeds full-year totals of six of the past seven years. In all, 306 deals were done in this period, on pace with the same time in 2014. Canadian private equity investors have also been increasingly active in international deals of late. To date this year, they have led or participated in 113 foreign deals with a total value of $125 billion. Fundraising in the domestic market collected $6.8 billion in the first nine months of 2015, which is down year over year.

A full PDF report on Q3 2015 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 continuing growth in the first three quarters of 2015. Disclosed values of transactions (announced and completed) totaled $16.1 billion as of September 30th, already exceeding the full year totals for three of the past four years. A total of 306 deals were done in the first nine months, on pace with the number of deals completed over the same period last year.

The $8.0 billion invested in the third quarter was down substantially from Q3 last year, when Burger King completed its $12.5 billion PE-backed acquisition of Tim Hortons, but still nearly matched the amount invested in Canadian companies in the first half. As compared to traditional merger & acquisition activity in Canada, the number of private equity deals has increased to 28% of the number of eligible M&A deals in the first nine months of this year, doubling from a low of 14% in 2011.

Top deals included Teachers’ $3.3 billion acquisition of Heritage Royalty, CI Capital Partners acquisition of KIK Custom Products for $2.1 billion, and Brookfield Asset Management’s investment in Brookfield Residential Properties for $1.1 billion.

At the end of September, eight large-cap transactions sized $500 million or greater captured 62% of all disclosed disbursements made in the Canadian market.  Deals sized between $100 million and $500 million took the second largest share of the total, or 23%, while deals sized less than $100 million accounted for the balance.

Canadian market trends by sector

Canadian manufacturing companies accounted for the largest share of buyout-PE deal-making in the first three quarters with 54 transactions, or 18% of the national total. Software & Mining companies followed second and third with 42 and 33 deals respectively. When measured by disclosed deal values, Oil & Gas and Consumer-Related companies dominated the largest transactions with $6.2 billion and $2.2 billion respectively. Mining companies came in third place, attracting $1.7 billion in investment.

Canadian market trends by region

The majority of buyout-PE transactions (announced and completed) in the Canadian market in the first three quarters of 2015 involved businesses that were located in Québec (44%) and Ontario (32%).  Ontario demonstrated the most growth over the first nine months of 2014, however, with 97 deals, a 33% increase. The number of deals done decreased in all other Canadian provinces and regions.

Though the number of deals done in Alberta declined in the first nine months, the province attracted the half of the top eight deals for the first nine months, securing $7.5 billion. Ontario-based companies attracted the second largest share, with $5.5 billion, followed by Quebec companies with $2.7 billion.

Canadian investor activity in global markets

Canadian buyout and related PE funds were substantially more active in international transactions in the first nine months relative to the year before. As of September 30th, Canadian funds led or participated in a total of 113 deals in other countries, and these were valued at approximately $124.7 billion. This compares against a total of 83 deals valued at only $8.9 billion in the first three quarters of last year. The largest foreign targets of Canadian buyout firms included CPPIB’s acquisition of Antares Capital, CDP’s acquisition of PetSmart, and Brookfield’s investment in Australian transportation company Asciano.

As with pervious periods, Canadian investment abroad was dominated by companies based in the United States. Of the 113 deals done, 65% were in American companies, and these deal values totaled $53.8 billion, or 43% of total deal values. Canadian PE firms led or participated in 24 deals over $1 billion in the first nine months, substantially exceeding the 15 such deals made by Canadian investors in the entire 2007 year, previously the best year on record for foreign large-cap dealmaking.

Trends in Canadian buyout-PE fund-raising

The fundraising activities of Canadian buyout funds maintained strong levels in the first nine months of 2015 with a total of $6.8 billion of new capital committed. Though only 46% of the $14.7 billion raised in all 2014, this was still a reasonable showing for Canadian funds, coming off the heels of three consecutive years of strong fundraising activity.

Source: Thomson Reuters.

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