Large-caps push Canadian PE values to $33.4 bln in 2017

Deal-making in Canada’s buyout and private equity market was especially robust in 2017, according to final data released by Thomson Reuters. Last year, 360 deals captured $33.4 billion in disclosed values, up 91 percent from 2016 on a dollar basis. Additionally, 2017 was in dollar terms the second most-active year in the Canadian market on record, falling only slightly behind 2007. Domestic deal volume increased at a more moderate 15 percent from 2016, pointing to the key influence of large-cap transactions. Canadian PE investors were active in 121 global deals in 2017, up 17 percent year over year, though disclosed values for these deals fell 33 percent.

A full PDF report of 2017 Canadian buyout and private equity market activity by Thomson Reuters is available here.

REPORT SUMMARY (reproduced courtesy of Thomson Reuters)

Canadian Buyout-PE Market Trends

The 2017 year saw a strong finish for Canada’s buyout and related private equity market. With a total of 360 transactions collectively valued at $33.4 billion, deal values increased by 91% from the previous year and reached its second highest level ever, only surpassed by the $33.7 billion invested in 2007. While the year-over-year increase in deal volumes of 15% was less spectacular, with 360 recorded deals 2017 remains the third most active year in Canadian buyout history, only behind 2014 and 2015, both of which saw figures in excess of 430.

The fourth quarter, $5 billion secondary sale of Bolton, Ontario-based Husky Injection Moldings Systems by OMERS Private Equity and Berkshire Hathaway to US private equity firm Platinum Equity has earned it the number one spot in both our top deals list and top exits list for the year. It’s joined at the top deals by the previously announced $4.8 billion acquisition of payments technology company DH Corp by Vista Equity Partners as well as by the $3.6 billion financing of SNC-Lavalin’s purchase of British engineering company WS Atkins plc.

Despite the number of Canadian Buyout-PE deals increasing 15% over the same period last year, the rate of overall Canadian M&A outpaced them. With 2,760 Canadian M&A targets in 2017 marking a 68% increase from the 1,638 a year previously, PE deals as a percentage of M&A dropped from 19% to 13%.

Canadian Market Trends by Sector

Business Service, Consumer Related, and Manufacturing companies were involved in the bulk of Canadian buyout deals during 2017. With 158 deals worth $17.8 billion, they represented 43.9% and 53.3% of deal volumes and dollars invested respectively.

Canadian Fund Performance

The performance of Canadian buyout, mezzanine, and private equity energy funds continued to show slight underperformance to public market comparators in the first three quarters of 2017. Final 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 5.4% 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 12.5%.

Canadian Market Trends by Region

Companies based in Ontario have continued to see a steady increase in their involvement in PE-buyout deals, up to a third of all deals in 2017 compared to just a quarter in 2014. With only 48 deals, Alberta dropped down to 13% of all Canadian deals, its lowest share since 2009. Atlantic Canada-based businesses were involved in 15 financings, up 300% from 2016.

Canadian Investor Activity in Global Markets

Canadian buyout and related PE funds participated in 121 non-Canadian deals throughout the year collectively valued at $70.7 billion. This represented a 17% increase in deal activity from 2016 but due to smaller disclosed deal amounts, deal values were down 33% on the year.

La Caisse de dépôt et placement du Québec was involved in the $8.0 billion acquisition of Tennessee-based TeamHealth Holdings as well as the $5.9 billion investment in New York-based USI Holdings. Canada Pension Plan Investment Board invested $750 million in the $7.0 billion Calpine Corporation acquisition led by Energy Capital Partners. CPPIB also partnered up with Baring Private Equity Asia to take Hong Kong school organization Nord Anglia Education private for $5.8 billion. PSP Investments was also involved in the $6.4 billion acquisition of Singapore-based renewable energy developer Equis Energy led by Global Infrastructure Partners.

Trends in Canadian buyout-PE fundraising

Onex Partners V completed its final close in the fourth quarter, raising C$9.1 billion and surpassing its C$8.3 billion target by 10%. Overall, $19.8 billion was raised by Canadian PE-buyout funds during 2017.

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