Canada Scoops & Analysis

Toronto-based mobile rewards platform Drop has raised $59 million (US$44 million) in a Series B financing, bringing total funding to $95 million (US$71 million). The round was led by U.S. venture capital firm HOF Capital and joined by New Enterprise Associates, Sierra Ventures and White Star Capital. RBC, Canada’s largest bank, also signed on as a strategic investor. Founded in 2015 and led by CEO Derrick Fung, Drop provides a free app that allows users to earn cash rewards on their purchases with more than 300 merchants. In addition, it connects brands with shoppers, including much sought-after Millennials.

The private equity group of Brookfield Asset Management has so far raised nearly US$8 billion ($10.6 billion) for its fifth flagship fund. Brookfield Capital Partners V, which held a US$6.5 billion first close last year, is expected to wrap up fundraising by the end of Q3 2019. Current commitments to the fund are effectively double that of its predecessor, which secured US$4 billion in 2016. BCP V was intended to be much bigger than prior PE offerings, PE Hub Canada reported last year. The goal is to help the PE group tap into a “global opportunity set that gets larger every year,” Managing Partner and CEO Cyrus Madon said in an interview.

Canada’s venture capital market sustained robust levels of activity in Q2, despite somewhat fewer dollars going into the largest financings. The top 10 second-quarter rounds secured $522 million from VC funds. That’s down 4 percent from the $542 million raised by the top 10 deals a year earlier, and down 16 percent from the $625 million that went to the top deals in Q2 2017. The estimate is based on PE Hub Canada’s list of the largest financings announced from April through June, supplemented by preliminary data from Refinitiv. It indicates some moderation in the influence of big late-stage rounds, which dominated Canadian VC trends last year.

Tech companies shopping for a private equity partner must be ready to perform due diligence, as not all PE firms are alike. That's the message from Scott Munro, a venture partner at Inovia Capital, in a PE Hub Canada feature article. Munro argues that only a handful of North American tech PE firms make suitable partners to tech companies in growth mode. He outlines the criteria the best PE firms use to evaluate opportunities and the situations in which they can create optionality for a company's management team and its investors.

During the last few years, general partner-led secondary transactions have evolved and are no longer just associated with GPs trying to dispose of lingering assets that have become hard to sell. Increasingly, GP-led secondaries are used to create for both PE fund sponsors and their LPs liquidity solutions with more attractive valuations than regular dispositions of funds’ assets. In a PE Hub Canada feature article, Torys LLP Partners Venera Ziegler, Scott Semer and Andrew Beck and Senior Associate Batya Nadler look at key issues associated with GP-led secondary transactions as well as related guidelines released by the Institutional Limited Partners Association for sponsors and LPs.

Vistara Capital Partners held the second close of its third technology debt fund, bringing the total raised to more than $100 million (US$75 million). Vistara Technology Growth Fund III, launched last October with a target of $130 million, is expected to reach its goal later this year, Managing Partner Randy Garg and Partner Noah Shipman told PE Hub Canada. The second close was anchored by two new institutions: the investment program of federal agency Export Development Canada and Nicola Wealth, a Canadian wealth management firm. Fund III will maintain Vistara’s strategy of providing flexible debt and equity financing for North American mid- to late-stage companies looking to fuel growth without diluting ownership.

Entrepreneur Capital has carved out a niche in Québec’s active private equity market, targeting small-cap opportunities often missed by other investors. Last month, Entrepreneur closed its fifth platform deal, acquiring a controlling stake in Spencer Supports Canada, a Montréal- and Stanstead, Québec-based apparel business. Partner André La Forge told PE Hub Canada the company’s unique competitive position in a fast-changing sector makes it a fit in Entrepreneur’s strategy. “In an industry that’s shrinking, Spencer has an edge as a high-volume, private-label garment business,” La Forge said. Entrepreneur plans to leverage Spencer’s “unexploited potential,” La Forge said, by looking into “new avenues of development,” such as acquisitions.

Peloton Capital Management, founded by two former Ontario Teachers’ Pension Plan principals, raised an initial $330 million for its first long-term mid-market fund. The Toronto private equity firm held PCM Fund I’s initial close in March, securing two-thirds of the $500 million target after three months of fundraising, Managing Partner Steve Faraone told PE Hub Canada. PCM kicked off fundraising in January, shortly after announcing Fund I’s $150 million anchor commitment from Stephen Smith, CEO of First National Financial Corp. The fund has since raised capital from family offices, institutions and wealthy investors, Faraone said. Among them are Canada’s largest banks, including Bank of Montreal, CIBC, Royal Bank of Canada and Toronto-Dominion Bank.

Imperial Capital Group wrapped up its seventh mid-market fund, raising $650 million. The Toronto private equity firm closed Imperial Capital Acquisition Fund VII in May, exceeding a $500 million target and hitting its hard cap in less than five months of fundraising, Managing Partners Jeff Rosenthal and Justin MacCormack told PE Hub Canada. Fund VII, Imperial’s largest fund to date, secured 30 percent more than Fund VI, which raised $500 million in 2017. It brings assets managed to more than $1.5 billion. The fund was backed by 300-plus new and existing limited partners, consisting of wealthy investors based primarily in Canada as well as eight Canadian institutional investors.

British Columbia Investment Management Corp is selling a portfolio of private equity fund stakes valued between $250 million and $500 million, two sources told Buyouts. The portfolio includes stakes in some large buyout funds, including two TPG funds, one of the sources said. BCI, a Canadian pension fund manager, has been working to build up its co-investment capabilities and increase in-house asset management. As part of that it’s been divesting fund commitments from what it considers non-core relationships.