Canadian private equity deal-making in first quarter breaks record

Canadian buyout and related private equity deal-making continued at a strong pace in the first quarter of 2015, according to final data released by Thomson Reuters. A total of 99 deals secured $6 billion in disclosed investment values between January and March, which is the most active first-quarter period ever recorded for the market in Canada. Domestic private equity investors were also more active overseas in this period, leading or participating in 39 transactions valued at about $34 billion. Canadian buyout and related private equity funds brought an additional $2.6 billion in commitments into the market in the first three months of 2015, which is down slightly from the year before.

A full PDF report on Q1 2015 Canadian buyout and related private equity market activity from 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 quarter of 2015. Disclosed values of transactions (announced and completed) totaled $6.0 billion as of March 31st, the strongest first quarter on record for Canadian private equity buyouts. A total of 99 deals were done in the first three months, also a new high for any first quarter, a traditionally slower period for the industry.

The $6.0 billion invested in the quarter was up a substantial 27% over the first quarter of 2014, and also up 9% on a quarter-over-quarter basis. Not including the third quarter of 2014, which was dominated by the PE-backed acquisition of Tim Hortons by Burger King, the last time Canadian companies attracted more than $6 billion of private equity investment in a single quarter was in Q2 2011.

Top deals included Brookfield’s $1.1 billion taking private of Brookfield Residential Properties, KKR-backed Veresen Midstream’s $760 million purchase of natural gas assets, and the $657 investment of Temasek Holdings and CEF Holdings in Niobec Mine.

At the end of March, four large-cap transactions sized $500 million or greater captured half 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 34%, while deals sized less than $100 million accounted for the balance.

Canadian market trends by sector

Canadian software companies accounted for the largest share of buyout-PE deal-making last quarter with 13 transactions, or 13% of the national total. Oil & Gas and Manufacturing followed a close second with 12 deals apiece, with Consumer-Related companies coming in third with 10 transactions.
When measured by disclosed deal values, Oil & Gas and Mining companies dominated the largest transactions with $2.5 billion and $1.4 billion respectively. Construction & Engineering companies came in third place, attracting $1.2 billion in investment.

Canadian market trends by region

The majority of buyout-PE transactions (announced and completed) in the Canadian market in Q1 2015 involved businesses that were located in Québec (43%) and Ontario (33%). Ontario demonstrated the most growth over Q1 2014, however, with 33 deals last quarter, a 57% increase. However, the number of deals done declined slightly in Quebec (4%), and more markedly in Alberta (24%), and British Columbia (57%).

Though the number of deals done in Alberta declined in the first quarter, the province attracted the bulk of the largest deals, securing $3.6 billion, more than all other provinces combined. Quebec-based companies attracted the second largest share, with $1.5 billion. Though Ontario saw the greatest growth in its number of deals, more than half had undisclosed values this quarter, leaving the province with only $900 million of disclosed disbursements.

Canadian investor activity in global markets

Canadian buyout and related PE funds were substantially more active in international transactions in the first quarter relative to the year before. As of March 31st, Canadian funds led or participated in a total of 39 deals in other countries, and these were valued at approximately $34 billion. This compares against a total of 28 deals valued at $2.2 billion reported in the first quarter of last year. Topping the list was Arizona-based Petsmart, which was acquired in an $11 billion LBO by a consortium of investors including the Caisse de dépôt et placement du Québec.

Unlike previous quarters, Canadian investment abroad was not dominated by companies based in the United States. Of these 39 deals done, 26% were in European companies, and these deal values totaled $15.2 billion, or 44%

Trends in Canadian buyout-PE fund-raising

The fundraising activities of Canadian buyout funds maintained strong levels in the first quarter of 2015 with a total of $2.6 billion of new capital committed. Though only 18% 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.

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