2018: The year Ottawa became a mega-cash magnet
Ordinarily, this would be a very big deal. The day after Ottawa’s civic elections, software company Assent Compliance revealed it had raised $130 million from investors to finance future growth — one of this year’s biggest equity investments for a Canadian startup.
This was the third round of funding in just the past three years for the company, reflecting chief executive Andrew Waitman’s drive to create a global specialist in the arcane art of data management software for supply chains. Assent Compliance, this most Ottawa of firms, helps large organizations make sure they are paying proper attention to government rules and regulations throughout their network of suppliers and sub-contractors.
When Waitman signed on as CEO in 2014, the startup had just 25 employees. Now there are more than 400 across Canada, the U.S. and the U.K.
Last week’s equity investment in Assent Compliance, which comes courtesy of New York private equity giant Warburg Pincus, will allow Waitman to further bolster his increasingly wide range of software products.
Even so, the Warburg Pincus announcement was largely overshadowed by the cash-raising prowess of firms in other parts of the region’s business sector.
Indeed, not since the tech boom of 2000 has so much investment money poured into the coffers of Ottawa-area firms.
The legalization of recreational marijuana on Oct. 17 has been a significant catalyst but by no means the only one.
Shareholders at Canopy Growth, the industry leader based out of Smiths Falls, recently approved a transaction that will see Constellation Brands — the U.S. beer, wine and spirits company — invest $5 billion in exchange for significant ownership. Crosstown cannabis products rival HEXO Corp. of Gatineau was also busy raising money this year. Its net cash position improved nearly $210 million during the nine months ended July 31 (latest available) — thanks largely to a sale of shares that grossed $149.5 million in January.
Cannabis firms weren’t the only ones to persuade investors to part with their money.
Ottawa’s burgeoning e-commerce software star, Shopify, saw its cash reserves top $2 billion (converted from US$1.6 billion) as of Sept. 30, up $720 million since year-end 2017. This largely reflected Shopify’s decision to sell millions of shares earlier this year to investors on the New York and TSX stock exchanges.
In August the company filed paperwork that will allow it to raise as much as $6.5 billion through further share sales on an expedited basis when Shopify judges the timing is right. In this, Shopify appears to have drawn an important lesson from Nortel Networks, which failed during the tech boom to buttress its cash reserves. From a corporate point of view it’s best to market your equity when you can, not when you have to.
This has also been an important year for Mitel Networks as far as corporate finance goes. The Kanata telecommunications technology pioneer revealed in April that it would be acquired in full by a New York investment firm, Searchlight Capital Partners. Assuming the deal clears all the regulatory hurdles as expected by year-end, Searchlight will take over all of Mitel’s equity for $1.7 billion (in addition to assuming Mitel’s considerable debt).
Even non-tech firms were tapping the stock market. Minto, one of Ottawa’s most prominent real estate firms, raised $200 million through the sale of units in its Minto Apartment Real Estate Investment Trust. The company said it will use part of the proceeds to diversify its real estate offerings. Some of the money has also been earmarked for estate planning for the Greenberg family that controls Minto.
Considering that a significant portion of the money raised this year by Ottawa firms will disappear into the accounts of foreign and corporate investors, does it really matter to the lives of ordinary people? Well, yes, because much of the cash is cascading through the local economy in the form of construction, hiring and general spending by employees with shares in their companies. Canopy Growth alone has hired hundreds of people so far this year and is investing a fortune in Smiths Falls infrastructure. Canopy, HEXO, Assent Compliance and Shopify are filling office complexes with new employees.
Equally important is the added security that strong cash balances give corporations, especially in the high-risk technology sector.