Canadian PE market sees record $37.2 bln invested in 2018

Deal values in Canada’s buyout and private equity (PE) market set a new record in 2018, according to final data released by Refinitiv.

Investment activity reflected values of $37.2 billion in total last year, up 31 percent from 2017, and surpassing the prior record of $33.7 billion set in 2007. Transaction volumes, however, were down 10 percent year over year.

Energy and environmental companies captured the largest share of dollar flows in 2018, or 33 percent. Information technology and media companies took the largest share of deals, or 16 percent.

Dealmaking by Canadian PE funds abroad was also at an all-time high last year, as investors joined 162 transactions valued at $121 billion.

A full PDF report of 2018 Canadian buyout and private equity market activity by Refinitiv is available here.

REPORT SUMMARY (reproduced courtesy of Refinitiv)

Canadian Buyout-PE Market Trends

Canada saw a record-breaking year of investment from buyout and related private equity investors in 2018, with 345 transactions collectively valued at $37.2 billion. Collective deal values for the year smashed the previous record set in 2007, when Canadian companies received $33.7 billion in investment. Deal volumes, however, were down 10% from the year prior, indicating more investment dollars flowing into fewer deals.

The $5.0 billion secondary sale of Bolton, Ontario-based Husky Injection Moldings Systems by OMERS Private Equity and Berkshire Hathaway to U.S. private equity firm Platinum Equity, has retained the number one spot in both Canada’s top deals list and top exits list. Ranking second and third on the list were Enbridge’s natural gas gathering and processing business, and Enercare, both having been acquired by Brookfield Asset Management for $4.3 billion apiece.

Canadian Market Trends by Sector & Stage

The Information Technology & Media sector remained the most active throughout the year, with 54 deals collectively valued at $3.9 billion. The consumer-related sector saw 45 deals in 2018, while manufacturing companies saw 38 deals collectively valued at $5.3 billion. The Energy & Environmental sector received the largest share of overall dollar values, with 24 deals collectively bringing in $12.2 billion. Add-on acquisitions grew to 34% of dealmaking, up from 20% just five years ago, with 116 deals in the year.

Canadian Fund Performance

The performance of Canadian buyout, private equity energy, and subordinated capital funds continued to show slight underperformance to public market comparators through to the first nine months of 2018. Published data provided by Cambridge Associates shows Canadian buyout, private equity energy, and subordinated capital funds with vintage years of 2000 or greater returning a since inception IRR of 5.7% as of the end of Q3. This lags far behind their US counterparts which showed consistent outperformance of public markets and a since inception IRR of 13.0%.

Canadian Market Trends by Region

Ontario saw a total of 126 deals in 2018, or 37% of the national total, the highest provincial share since 2007. As recently as 2013, Ontario-based companies comprised only 26% of dealmaking. Québec placed right behind with 125 deals, or a 36% share of the national total. Among Canada’s major urban regions, Calgary saw the most impressive growth in dollars invested in 2018, with $7.1 billion, up from $1.9 billion last year. Vancouver, also showing well, saw $5.5 billion in PE investment in 2018, up from $1.4 billion the year prior.

Canadian Investor Activity in Global Markets

Canadian buyout and related PE funds participated in 162 non-Canadian deals during 2018, collectively valued at $121 billion, both all-time annual highs. Top deals in non-Canadian companies during the year included CPPIB’s investment in Blackstone’s $21.7 billion acquisition of Refinitiv, Brookfield Asset Management’s $18.9 billion takeover of Chicago-based U.S. mall owner GGP (subsequently renamed Brookfield Property REIT), Chinese online payment platform Ant Financial’s $600 million investment from the Canada Pension Plan Investment Board as part of an $18.2 billion deal, and Johnson Controls Power Solutions’ acquisition by Brookfield Business Partners and la Caisse de dépôt et placement du Québec for $17.5 billion.

Trends in Canadian buyout-PE fundraising

Leading Canadian fundraising in 2018 was Brookfield Capital Partners, which announced it closed its $8.6 billion Fund V in October. Other highlights included Waterous Energy Fund, which closed its initial fund in the second quarter at $1.4 billion and will invest in distressed oil & gas companies; and Brookfield Asset Management, which had the final close of its Infrastructure Debt Fund in the beginning of the year at $1.1 billion. An additional $2.8 billion was raised by Northleaf Capital Partners, to be split between their Private Equity Investors VII and Secondary Partners II funds. Collectively, Canadian buyout funds raised $17.1 billion during the year.