Novacap’s fifth tech-buyout fund blows by target, raises $840 mln

Novacap has closed its fifth mid-market technology fund, securing $840 million with the help of an expanded base of limited partners.

Novacap TMT V exceeded by 40 percent its original goal of $600 million, the Montréal private equity firm announced today. The fund is more than twice the size of its predecessor, which raised $380 million in 2014.

Fund V is the largest raised in Novacap’s 35-year history. Its close brings assets managed by the firm to $2.25 billion.

Novacap achieved this by recruiting a bigger and more diversified investor group. Returning LPs — mostly Canadian, U.S. and European institutional investors and wealthy individuals — were joined by new LPs recruited largely from abroad. Credit Suisse was the placement agent.

In April, Novacap President and Managing Partner Pascal Tremblay told PE Hub Canada he was looking to sign up more global LPs partly to gain co-investment resources and increase the firm’s visibility outside of Canada.

In all, some 50 domestic and international LPs committed to Fund V. Their identities were not disclosed, but the group likely includes Caisse de dépôt et placement du Québec. The $271-billion pension fund has backed every previous Novacap fund.

Fund V’s strategy will show continuity with prior funds, making control-stake investments in Canadian and U.S. technology, media and telecom companies with revenue of $30 million to $300 million. Deal sizes are expected to range from $20 million to $100 million.

Novacap has traditionally focused on local tech opportunities, using proprietary channels to source deal flow. More than 80 percent of platform investments have been made in the Canadian market. Add-on acquisitions are largely sourced internationally.

With a deeper capital pool, Fund V will undertake more investments, Tremblay told PE Hub Canada in April. At the time, Novacap TMT IV was about 70 percent invested, with eight portfolio companies.

Along with fundraising, Novacap has been active on the deal front. Earlier this year, it sold Oxford Networks, a telecom and IT solutions business, to Oak Hill Capital Partners. As part of the deal, Oak Hill’s FirstLight Fiber entered Novacap’s portfolio.

Other recent tech investments include virtual-data-room platform Firmex, medical-imaging specialist Intelerad, and enterprise-resource-planning software company Syntax.

Novacap’s tech group is led by Tremblay and Senior Partners François Laflamme, Ted Mocarski, Stéphane Tremblay and Étienne Veilleux and Partner Yong Kwon. The team operates from the Montréal headquarters and the firm’s Toronto office, opened four years ago.

Novacap also has an industries group led by President and Managing Partner Jacques Foisy. Novacap Industries IV raised $470 million in 2016.

Photo of Pascal Tremblay, president and managing partner of Novacap, courtesy of the firm.