Canadian Private Equity Slumped in Q1

TORONTO (Reuters) – Canadian private-equity buyouts slumped in the first quarter, led by a pullback by foreign investors as the global economic crisis weighed on deal-making, a leading industry association said on Tuesday.

Canada’s Venture Capital and Private Equity Association said there were 18 completed and pending buyout transactions in in the first quarter, 10 of which had disclosed values of $600 million.

That compared with 33 completed and pending transactions in the first three months of 2008, with disclosed value of $2.4 billion.

“The worldwide economic turmoil that began in Q4, 2008, continued in Q1 2009 and our industry, in common with most economic sectors, has not been immune from its effects,” CVCA President Gregory Smith said in a statement.

The CVCA said much of the shortfall in the first quarter came as foreign investors slashed Canadian buyout investments to $529 million, versus just over $2 billion in the first three months of 2008.

Private equity firms are struggling to keep their portfolio companies healthy during the global economic crisis, which has cut opportunities to exit investments by selling them or taking them public.

Buyout deal sizes are seen being restricted until confidence returns to the market, and credit becomes more accessible following the U.S. sub-prime debacle.

The CVCA also said in its report on Tuesday that Canadian fund-raising for buyouts paused during the first quarter, but did not provide specific data.

Smith said the industry was well-funded going forward, however.

“The fund-raising record of the last three years combined with the relative strength of Canadian financial institutions have resulted in Canada’s buyout industry still having considerable capital available for deployment,” he said.

In an interview with Reuters last week, Smith said the industry would likely resume investment activity toward the end of 2009 as asset valuations settled at levels that better reflect intrinsic value.

Canada’s private equity buyout industry added more than $30 billion in value to the country’s GDP in the past five years, and created more than 100,000 jobs, according to previously published CVCA data. (Reporting by Pav Jordan; editing by Rob Wilson)