Canadian PE activity hits $14.6 bln in H1 2017, best first half ever

Canada’s buyout and related private equity market showed robust growth in the first half of 2017, with 184 deals capturing $14.6 billion in disclosed values, up 55 percent from H1 2016, according to final data released by Thomson Reuters. As a result, the domestic market saw its most active first half in dollar terms on record. Deal volumes also increased 10 percent in H1 2017, relative to a year ago. Activity was led by Vista Equity Partner’s $4.8 billion buy of DH Corp, the largest Canadian private equity deal in three years. Canadian investors were active in 65 international deals in H1 2017, up 35 percent year over year, though values for these fell 7 percent.

A full PDF report on H1 2017 Canadian buyout and related private equity market activity by Thomson Reuters is available here.

REPORT SUMMARY (reproduced courtesy of Thomson Reuters)

Canadian Buyout-PE Market Trends

Deal-making activity in Canada’s buyout and related private equity market showed a remarkable increase during the second quarter of 2017. With a total of 184 transactions collectively valued at $14.6 billion during the first half of the year, deal values increased by 55% from H1 2016 and saw the strongest first half in history. Deal volumes increased 10% from the same period last year, but still fell 16% short of the levels seen in 2014 & 2015.

The Canadian top deals list was dominated by Vista Equity Partner’s $4.8 billion purchase of payments and lending technology company DH Corp, Restaurant Brands International’s PE-backed acquisition of Popeye’s Chicken for $2.4 billion, and Starwood Capital Group’s purchase of Milestone Apartments for $1.7 billion.

Investment activity also showed a steady increase over the last two quarters compared to Canadian merger & acquisition activity overall. While still not reaching the peak of 32% of the number of traditional merger & acquisition deals in Q4 2014, this percentage has increased from only 17% in Q4 2016 to 24% in Q2 2017.

Canadian Market Trends by Sector

Canadian finance, consumer related, and pure business service companies combined were involved in only 45, or 24%, of total deals during the first half of 2017 but received 76% of total dollars invested, or $11.2 billion. Other popular sectors included manufacturing and software, which contained 23 and 20 deals 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 quarter of 2017. Final data provided by Cambridge Associates shows Canadian buyout, mezzanine, and private equity energy funds with vintage years of 2000 or greater returning a since inception IRR of 4.9% as of the end of Q1. This lags far behind their US counterparts which showed consistent outperformance of public markets and a since inception IRR of 12.7%.

Canadian Market Trends by Region

Québec companies continued to see a decline in their share of buyout deals, with 59 deals in the first half of the year, or 32% of all deals. This represented a 16% decrease from the same period last year. Ontario volumes increased 27% from the first half of 2016 with 62 recorded deals, marking the first time since 2011 that Ontario has had more deals in the first half than Québec.

Canadian Investor Activity in Global Markets

Canadian buyout and related PE funds participated in 36 non-Canadian deals in the second quarter collectively valued at $21 billion. This brought the total number of non-Canadian deals to 65 for the first half of the year, a 35% increase from the first half of 2016.

La Caisse de dépôt et placement du Québec was involved in three of the top five foreign deals during the first half, including the $8.0 billion acquisition of TeamHealth Holdings, the $5.9 billion investment in insurance company USI Holdings, and the $4.6 billion investment in GE Water & Process Technologies. Canada Pension Plan Investment Board also partnered up with Baring Private Equity Asia to take school organization Nord Anglia Education private for $5.8 billion.

Trends in Canadian buyout-PE fundraising

Fundraising for Canadian buyout funds remained relatively quiet during the second quarter of 2017, especially when compared to the record-breaking dollar amounts raised during 2016. Nine buyout funds raised an additional $2.7 billion in the second quarter, bringing the first half’s total up to $5.2 billion.

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