Canadian deal value drops, volume rises – CVCA

The Canadian Venture Capital and Private Equity Association saw almost 20% jump in deal volumes last year.

Deal value in Canada in 2015 fell by almost half to $22.82 billion from the previous year’s record of $42.2 billion, according to the Canadian Venture Capital and Private Equity Association (CVCA). In contrast, deal volume was up 19 percent with 399 completed deals last year, compared with 334 in 2014. 

The total deal value in 2014 was boosted by the $12 billion takeover of Tim Hortons by 3G Capital and Warren Buffett, the CVCA said in its 2015 Canadian Private Equity Market Overview. Last year’s total value was still historically high and more than double the 2013 amount of $11.2 billion.

The biggest deal of the year was the Ontario Teachers’ Pension Plan, which acquired oil and gas royalties portfolio Heritage Royalty Limited Partnership in June for $3.3 billion.

The US saw a slight drop in both deal volume and value, to 3,500 deals totaling $632 billion. In 2014 its deal volume was roughly 3,800, which accounted for $634 billion in value, according to the 2015 Private Equity Trends Report by the Private Equity Growth Capital Council.

In terms of sectors in Canada, industrial and manufacturing saw a sharp increase of 48 percent to 62 deals in 2015. Its deal value was up 40 percent at $3.11 billion. Mining and resources also jumped to 52 deals from 26 deals in 2014, with its 2015 deal value totaling $1.85 billion. Given the fallen oil prices, the deal volume in the energy sector fell 41 percent to 48 deals worth $8.62 billion. In 2014, there were 82 deals worth $13.05 billion.

“There is a sector shift going on with oil and gas coming off in terms of activity,” CVCA chief executive Mike Woollatt told Private Equity International. “It’s still at the top in terms of dollars because the companies are so large on the buyout side. There’s a lot of interest in mining despite the prices, so what we’re seeing is an activity shift [among sectors].”

Exits were slightly down in both volume and value, with 56 exits accounting for $16.73 billion. In 2014 there were 62 exits worth $20.67 billion. Initial public offerings saw the biggest drop, to four IPOs worth $2.55 billion from five IPOs worth $20.67 billion. Mergers and acquisitions also dropped, to 33 exits worth $10.03 billion, from 42 exits worth $11.25 billion.

Only secondary exits saw an uptick from 2014, with 17 exits worth $3.81 billion. Still, M&A represented about 60 percent of both volume and value for 2015, and the biggest exit of the year was carried out by Birch Hill Equity Partners, which sold Shred-it International to Stericycle for $2.98 billion.

There were 31 funds raising capital in Canada in 2015, drawing about $14 billion in commitments throughout the year, compared with 33 funds with $12 billion in the previous year.

Woollatt said most investors were bullish on the Canadian markets, with two-thirds of their members in a survey indicating that economic conditions were favourable for Canadian private equity. He cited the strong greenback compared with the loonie as a reason. Canadian PE funds drawing capital from US limited partners and making exits in US dollars, as well as having some portfolio companies that make revenues in US dollars, helped, he said.

“The only thing that hurts is that attracting talent becomes more difficult, and most of our private equity funds don’t just invest in the US but globally, which gets trickier with the strong dollar,” he said. “But they think this is positive overall.”