Pension giants drive PE activity in Canada

Two mega-deals – both involving large Canadian pension plans – accounted for almost 70% of investment activity in the country in the first half of the year.

Two mega-deals accounted for almost 70 percent of the private equity capital invested in Canada in the first half of 2018 as the downward trend in the number of transactions continued.

The C$5.1 billion ($3.87 billion; €3.34 billion) recapitalisation of Ontario-based GFL Environmental by a consortium including Ontario Teachers’ Pension Plan, and the C$5 billion sale by OMERS Private Equity of its position in Husky Injection Molding Systems to US private equity firm Platinum Equity accounted for 69.7 percent of the C$14.5 billion invested in the first half, according to data from the Canadian Venture Capital and Private Equity Association.

The recent data show that mega-deals – classified as transactions larger than C$2.5 billion – are on the rise. They accounted for 51 percent of capital invested in the first half of 2017, and zero in the first half of 2016.

In total, C$7.6 billion was invested in 146 deals in the second quarter, bringing the first-half total to 288 transactions. Of those first-half deals, 65 percent were less than C$25 million – up from 60 percent in the same period last year. The number of quarterly transactions peaked in the second quarter of 2017 at 179 deals.

“Canadian private equity appears on pace from previous years,” Mike Woollatt, chief executive of the CVCA, said in a statement. “However on the dollar side it is increasingly driven by significant deals; suggesting the levels are a bit more tenuous.

“In the absence of a few large deals, activity in the Canadian PE market is being driven substantially by smaller deals as activity shifts to categories with typically smaller deal sizes.”

There were 41 exits totalling C$10.5 billion in H1, compared to 152 exits totalling C$11.3 billion in the whole of 2017.

The industrial and manufacturing segment has proven most popular, with 64 deals valued at a combined C$5.6 billion. This was followed in deal number by ICT (information communications and technology), with 45 deals valued at C$578 million, and in dollar value by cleantech, with 12 deals valued at C$5.2 billion.