Canadian buyouts slow in H1 2013

Private equity activity in Canada has fallen year-on-year while fundraising by Canadian managers has nearly doubled.

Buyouts in Canada reached C$4.6 billion (€3.3 billion; $4.4 billion) during the first six months of 2013, representing a 25 percent drop compared to the same period last year, according to data from Canada’s Venture Capital and Private Equity Association and Thomson Reuters.

The number of private equity transactions was also down year-on-year, falling about 36 percent to 119. The natural resource sector continues to attract the majority of deals, representing 30 percent of total transactions.

While overall private equity activity in Canada fell during both the first and second quarters of 2013, the decline comes after a record year for the asset class in Canada in 2012. The drop in volume can also be attributed primarily to a lack of larger transactions, as “mid-market buyout and growth equity deals are still getting done at levels consistent with what we have seen for the past two to three years”, president of the CVCA, Peter van der Velden, said in a statement. 

Fundraising in Canada has nearly doubled compared to the first half of 2012, reaching C$3.7 billion and putting Canada on track to exceed the C$4.8 billion raised during 2012.

According to data from CVCA and Thomson Reuters.

Although domestic private equity is down, Canadian investment abroad during the second quarter rose to C$4.7 billion, an 87 percent quarterly increase and the second largest total amount invested internationally during the past 12 months. 

Meanwhile, fundraising in Canada has nearly doubled compared to the first half of 2012, reaching C$3.7 billion. While the capital raised so far does put Canada on track to exceed the C$4.8 billion raised during 2012, CVCA executive director Richard Remillard highlighted the difficulty of predicting year-end totals based on half-year figures.

“When you have a half year’s worth of numbers you really can’t project outward into what the final year will look like with a huge degree of confidence,” he said. “You tend to have a much better idea after the third quarter.”

Still, the C$3.7 billion raised by general partners does bode well for Canada’s buyout industry, which has largely been dominated by the direct investing arms of public pension plans such as the Canada Pension Plan Investment Board, the Ontario Teachers’ Pension Plan and the Ontario Municipal Employees’ Retirement System.

“That’s a really key metric for what that says about investment dollars going forward and the optimism that both investors in private equity funds and funds themselves have about opportunities,” Remillard said.