Novacap aims to raise more than C$650 million ($490 million) for its fifth mid-market industries fund by expanding its global base of limited partners.
The Montréal private equity firm began raising Novacap Industries V in late 2018, Chairman and Managing Partner Jacques Foisy told Buyouts. He expects to see an initial close by the spring and completion later this year.
If successful, Fund V would secure 38 percent more in capital than its predecessor, which raised C$470 million in 2016.
More than C$400 million has already been soft-circled for Fund V, primarily from returning investors, he said.
Novacap Industries IV was backed by some 40 North American LPs, including pension funds, family offices and wealthy investors. Among them was Caisse de dépôt et placement du Québec, which has contributed to every Novacap fund.
The firm plans to grow and diversify this investor base by signing up new LPs in Canada, the U.S. and Europe. Credit Suisse is placement agent.
Novacap’s industries group, one of two sector-focused groups, acquires North American mid-market companies. These are generally makers of consumer and industrial goods, food processors, business-service providers and distributors with revenue of up to C$500 million.
Target opportunities are often Canadian businesses with particular potential to expand abroad.
Novacap specializes as a partner to such companies, investing in cross-border initiatives that can take “a local leader and turn it into a North American leader,” organically and through add-ons, Foisy said.
Fund V will maintain Novacap’s 38-year strategy, Foisy said. The boosted war chest will enable more platform deals.
Fund IV, approaching full investment, has backed nine companies. Its successor is likely to invest in 12 to 14 opportunities.
More resources will also help Novacap build on the broader market coverage it established in recent years.
In 2013, the firm opened a Toronto office to source additional pan-Canadian deal flow. Since then, Novacap bumped up personnel at this location, supporting increased investing outside its Québec backyard.
This activity was on display in 2018. Examples include the merger of Toronto luxury mattress maker Kingsdown Canada with its U.S. counterpart, restoring the 115-year-old brand to common ownership.
That deal, coupled with last year’s buy of Zedbed, a Shawinigan, Québec, eco-friendly foam-mattress maker, positions Kingsdown for global growth, Foisy said.
Other 2018 acquisitions include Joseph Ribkoff, a Montréal women’s-apparel business, and Mailhot Industries, a Saint-Jacques, Québec, hydraulic cylinders producer.
Along with acquiring assets last year, Novacap sold KDC, a Longueuil, Québec, beauty and personal care products maker it acquired in 2002, to a group led by Cornell Capital for more than C$1 billion.
Adding to the team
Foisy oversees some 20 investment pros, split between the firm’s Montréal and Toronto offices. He expects to expand the team, including at the highest ranks.
The industries group is also led by Senior Partners Michel Côté, Domenic Mancini, Marc Paiement, Frédérick Perrault and Michel Toutant.
Novacap also has a technology-media-telecom group led by President and Managing Partner Pascal Tremblay. Novacap TMT V raised C$840 million in 2017.
Canada’s PE market broke records in 2018, including in terms of dollars invested, according to Refinitiv data.
While most deals engaged mid-market companies, the bulk of the cash went to a few large caps, such as the C$5.1 billion refinancing of Toronto waste manager GFL Environmental, led by BC Partners and Ontario Teachers’ Pension Plan.
As a result, deal values hit C$37.2 billion last year, exceeding the prior record set in 2007.