Canadian private equity deal-making in first half highest since 2007

Canadian buyout and related private equity deal-making continued to grow in the first half of 2015, according to final data released by Thomson Reuters. Disclosed values of deals (announced and closed) totaled $11.4 billion as of June 30th, the strongest first half for private equity investment in Canada since 2007. A total of 205 deals were done in this period, which set a new first-half record, Thomson Reuters said. Canadian buyout-PE investors were also more active overseas between January and June, leading or participating in 82 transactions valued at about $95 billion. In contrast, the pace of Canadian private equity fundraising slowed in the first half, with capital committed totaling $4.4 billion.

A full PDF report on Q2 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 half of 2015. Disclosed values of transactions (announced and completed) totaled $11.4 billion as of June 30th, the strongest first half for Canadian private equity buyouts since 2007. A total of 205 deals were done in the first six months, a new high for the number of private equity deals done from January to June.

The $5.5 billion invested in the second quarter was down 8% from the first quarter of 2015 when $6.0 billion was invested, but more than doubled over Q2 2014. Indeed, Q2 this year saw the most dollars invested in any second quarter since 2011. 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 half this year, doubling from a low of 14% in 2011.

Top deals included Teachers’ $3.3 billion acquisition of Heritage Royalty, Cenovus Energy’s oil & gas royalty business unit, and Brookfield Asset Management’s investments in Brookfield Residential Properties and the PE-backed merger of Ainsworth Lumber with Norbord, for $1.1 billion and $763 million respectively.

At the end of June, six large-cap transactions sized $500 million or greater captured 63% 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 22%, 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 half with 38 transactions, or 19% of the national total. Oil & Gas and Mining companies followed a close second and third with 20 and 19 deals respectively. When measured by disclosed deal values, Oil & Gas and Mining companies dominated the largest transactions with $5.9 billion and $1.6 billion respectively. Manufacturing companies came in third place, attracting $1.3 billion in investment.

Canadian market trends by region

The majority of buyout-PE transactions (announced and completed) in the Canadian market in the first half of 2015 involved businesses that were located in Québec (45%) and Ontario (33%). Ontario demonstrated the most growth over the first half of 2014, however, with 68 deals last quarter, a 55% increase. The number of deals done increased slightly in Quebec (2%), but declined markedly in Alberta (29%), and British Columbia (59%)

Though the number of deals done in Alberta declined in the first half, the province attracted the bulk of the largest deals, securing $7.1 billion, more than all other provinces combined. Ontario-based companies attracted the second largest share, with $2.3 billion, followed by Quebec companies with $1.9 billion.

Canadian investor activity in global markets

Canadian buyout and related PE funds were substantially more active in international transactions in the first half relative to the year before. As of June 30th, Canadian funds led or participated in a total of 82 deals in other countries, and these were valued at approximately $95 billion. This compares against a total of 48 deals valued at $3.7 billion reported in the first half of last year. The largest foreign targets of Canadian buyout firms included CPPIB’s acquisition of Antares Capital, CDP’s acquisition of PetSmart, and Borealis’ investment in Swedish electrical company Fortum Distribution.

As with pervious periods, Canadian investment abroad was dominated by companies based in the United States. Of the 82 deals done, 67% were in American companies, and these deal values totaled $51.7 billion, or 54%. Canadian PE firms led or participated in 19 deals over $1 billion in the first half, substantially exceeding the 15 such deals made by Canadian investors in the entire 2007 year.

Trends in Canadian buyout-PE fund-raising

The fundraising activities of Canadian buyout funds maintained strong levels in the first half of 2015 with a total of $4.4 billion of new capital committed. Though only 30% of the $14.7 billion raised in all 2014, this was still a strong showing for Canadian funds, coming off the heels of three consecutive years of strong fundraising activity.

Source: Thomson Reuters.

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