PE-backed Canadian companies show outsized growth: study

A PwC Canada-CVCA study found small businesses in Canada backed by private equity investment showed stronger growth relative to non-PE backed equivalents.

A PwC Canada study, published by the Canadian Venture Capital and Private Equity Association, found small businesses in Canada backed by private equity investment showed stronger growth relative to non-PE backed equivalents. Among the findings, job growth at PE-backed companies was 3x greater than non-PE backed companies, while revenue in the former also maintained double-digit growth post-investment, which is significantly higher than that of their non-PE backed counterparts.

Read the PwC Canada report, Private Equity: a significant driver of growth for Canadian SMEs, here.

PRESS RELEASE

New PwC Canada Study Demonstrates Canadian Private Equity’s Positive Impact on SMEs and the Overall Canadian Economy

Toronto, ON – December 1, 2020 – The Canadian Venture Capital and Private Equity Association (CVCA) is pleased today to share the results of a new study on the economic impact of private equity (PE). The study is based on findings from PwC Canada and was commissioned by the CVCA. The study demonstrates that, in partnership with founders and management teams, PE funds have a significant positive impact on investee companies, particularly through employment growth, capital investment and productivity gains.

According to CVCA Intelligence, over 65% of PE transactions in Canada are under CAD $25M, highlighting the direct connection between Canadian PE investment and Small and Medium-Sized Enterprises (SMEs). SMEs are the backbone of the Canadian economy and according to Statistics Canada, supports over 85% of all new jobs across the country.

The majority of investors in private equity funds are pension plans and other institutional investors. The success of these investments provides income security and supports the retirement ambitions of Canada’s middle-class which include Canadian teachers, first responders, and autoworkers.

Among the key findings in the study:

• Employment growth at PE-backed companies was three times greater than non-PE backed equivalents. On a cumulative basis, the typical PE-backed company added almost one quarter (24%) to its headcount in the three years post investment.
• Capital investment, as a share of revenue, rose by 75% in PE-backed companies post-deal, significantly faster than non-PE backed benchmarks.
• Revenue in PE backed companies maintained double digit growth post-investment (averaging 10.9% per annum), which is significantly higher than non-PE backed benchmark companies.
• Profitability in PE-backed companies was higher than equivalent sized companies listed on the TSX.
• Productivity in PE-backed companies experienced over twice the rate of productivity growth in the 3 years following the initial PE investment.

Data was collected in four sectors (industrial and manufacturing, information and communications technology, business products and services, and cleantech) and was compared against benchmarks developed from companies listed on the TSX operating in the same sectors in the four-year period from 2015-2019.

“The business and investment community has known for years that PE partnerships transform companies for the better. The study released today explains just how much Canadian private equity and CVCA’s PE members contribute to our SMEs, job creation and the overall Canadian economy,” said Kim Furlong, Chief Executive Officer, Canadian Venture Capital and Private Equity Association.

The full PwC study can be accessed at PrivateEquityAtWork.ca, a new online resource created to provide more information about the positive role private equity plays in creating jobs, driving economic growth, and supporting Canadian communities.

About the CVCA
Our vision
A thriving Canadian economy driven by private capital.
Our Mission
CVCA’s mission is to help our members fuel the economy of the future by growing the businesses of today. We do this by supporting and connecting a vibrant private capital industry with advocacy, research, and education.
CVCA is also the nation’s ultimate resource for data on Canadian private capital investments. Please visit: http://www.cvca.ca.

For more information or to arrange an interview, please contact:

Jon Jackson
Head of Communications
416-553-1142
jjackson@cvca.ca

Izadella Sta Romana
Marketing and Brand Coordinator
647-228-9244
istaromana@cvca.ca