Canadian fundraising reaches highest level since 2006

Fundraising in Canada tripled in 2013, while deal volume rose to the highest level since 2008.

Private equity fundraising in Canada reached C$16.1 billion (€10.5 billion; $14.5 billion) in 2013, more than triple the amount raised in 2012 and the highest level since 2006, according to data from Canada’s Venture Capital and Private Equity Association and Thomson Reuters.
Despite the surge in fundraising, three private equity funds raised about 60 percent of the capital last year. New commitments went to 35 Canadian funds in 2013, compared to 27 in 2012. One of the larger funds in market in Canada is Onex Corporation’s Fund IV, which had raised about $3.65 billion toward a $4.5 billion target as of 20 February, according to documents filed with the US Securities and Exchange Commission.
Buyouts in Canada reached C$12.3 billion in 2013, representing a 5 percent rise over the previous year and the highest level since 2008. Five large transactions valued at C$500 million or greater accounted for more than half of deal values last year, while deals sized between C$100 million and C$500 million represented 30 percent of market activity.
The number of private equity transactions in Canada last year fell slightly to 320, down 4 percent year-over year. Domestic managers completed roughly 70 percent of buyouts in the country. 
“Relative to the US market, the Canadian market for private equity still remains underdeveloped,” Richard Remillard, executive director of the CVCA, told Private Equity International. “Private equity as a percent of GDP is about half of what it is in the US, so there’s more deals to be had.”
Still, the overall economic environment for private equity in Canada remains very healthy, which should translate to another year of rising deal volume, according to Remillard.
“You’ve got a no-inflation environment [and] there’s an added benefit that didn’t manifest itself until very recently, which is that the Canadian dollar has been declining relative to the US dollar for the last several months,” he said. “My sense is from talking around that 2014 is going to be a very robust year.”
The manufacturing and processing sector represented the most popular industry for investment in Canada in 2013, accounting for 16 percent of deals, followed by oil and gas at 12 percent and mining-related deals at 11 percent. 
While fundraising by Canadian managers rose considerably last year, limited partner appetite for domestic GPs is likely to continue to rise in 2014, according to Remillard.
“LPs around the globe have sort of woken up to the Canada story for private equity,” he said. “The macro story is quite positive.”