Cana­dian pri­vate equity, ven­ture cap­i­tal deal ac­tiv­ity soars

The Pak Banker - - MARKETS/SPORTS -

Cana­dian pri­vate equity in­vest­ments over­seas surged to record lev­els in 2015 on the back of some ma­jor buy­outs by Cana­dian pen­sion funds across a wide range of sec­tors, ac­cord­ing to data re­leased. The Thom­son Reuters data showed that Cana­dian pri­vate equity in­vest­ments abroad jumped to C$159.2 bil­lion ($114 bil­lion) in 2015, more than the com­bined value of all such deals struck by Cana­dian PE firms in the five years prior.

"Part of the chal­lenge for a Cana­di­an­based pri­vate equity plat­form is that there just aren't a lot of op­por­tu­ni­ties in Canada," said Dou­gal Macdon­ald, the head of Mor­gan Stan­ley in Canada. "With the sheer size of some of th­ese funds, whether it's CPPIB, Teach­ers or Onex, you re­ally have to look out­side Canada for op­por­tu­ni­ties. We ex­pect this trend to con­tinue." The top 10 out­bound PE buy­outs ac­counted for just over C$100 bil­lion in deal value, and Canada's largest pen­sion fund man­ager, CPPIB, or the Canada Pen­sion Plan In­vest­ment Board, was in­volved in six of those deals in 2015.

Pri­vate equity buy­outs of Cana­dian com­pa­nies fell from 2014 lev­els, but 2015 rep­re­sented the se­cond best year for PE buy­outs in the Cana­dian mar­ket since 2007. While there are fewer buy­out op­por­tu­ni­ties in Canada, the one area that is ripe for pick­ing this year is the en­ergy sec­tor, Macdon­ald said.

"Our ex­pec­ta­tion is that there will be more ac­tiv­ity, some of which will be op­por­tunis­tic ac­qui­si­tions of pub­lic com­pa­nies given the en­vi­ron­ment and some will be driven by ra­tio­nal­iza­tion of port­fo­lios, which will drive as­sets sales."

The data also showed ven­ture cap­i­tal in­vest­ment in Cana­dian com­pa­nies grew at a strong pace in 2015. Firms in­vested C$2.64 bil­lion in the space last year, up 11 per­cent from 2014 lev­els. And over 20 Cana­dian com­pa­nies at­tracted fund­ing rounds of more than C$25 mil­lion.

Lately how­ever, there are con­cerns build­ing about val­u­a­tions in some pock­ets in the start-up space, cau­tions John Ruf­folo, head of OMERS Ven­tures, the VC arm of the OMERS pen­sion fund.

"You're get­ting lots of pun­dits who think that 2016 might ac­tu­ally see a slow­down of ven­ture fi­nanc­ing. Cer­tainly the hot com­pa­nies, may be un­af­fected, but a lot of the oth­ers might see a far more dif­fi­cult year," said Ruf­folo, adding that he still likes the prospects of those in the health­care and ar­ti­fi­cial in­tel­li­gence space.

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