The VC and PE Markets in Canada

The VC and PE Markets in Canada

The Canadian Venture Capital and Private Equity Association (CVCA) has posted what it calls an “overview” of the VC and PE Markets in that country in 2017. It reports growth in both of those markets, although growth at distinct velocities.

The report tells us that, on the VC side, Canada has seen steady though undramatic growth for years “across the entire spectrum of stages in the ecosystem.” Meanwhile, on the PE side, growth has been quite dramatic. In 2016 there were 542 deals in the PE space. In 2017 there were 603. In 2016 the total valuation of those deals was $13.8 billion. In 2017 nearly twice that, $26.3 billion.

The privatization of DH Corporation was one big PE deal that helped make these numbers stand out. So was the acquisition of Garda World Security Corporation by Apax Partners LLP.

Garda, the corporation behind the familiar armored cars, is one of the biggest privately held security providers in the world.

More about Venture Capital

The paper quotes Mike Woollatt, the CEO of CVCA, saying, “The excitement many of us are feeling in the Canadian venture capital ecosystem is being validated by the data. We’re seeing historic investment in cutting-edge businesses across the country underlining the confidence in Canadian innovation.

The paper breaks the VC highlights down by city. Montreal based ventures received 28% of the total dollars disbursed; Toronto ventures received 26%, Vancouver 14%.

Looking at exits, 2016 was a slump and 2017 was a recovery. In 2016 there were only 33 exits with a total value of $0.6 billion. In 2017, though, there were 39 exits with a total valuation of $1.7 billion. A little arithmetic indicates that the average value of one of those 2017 exits was about $43 million. The average value of one of the 2016 exits was about $18 million.

One of the exits was the sale of Luxury Retreats, a concierge-services company based in Montreal, to Airbnb. Airbnb of course is an apartment rental website that is in the process of turning itself into a full-service facilitator of travel plans, and Luxury fit very neatly into that growth.

More about Private Equity

Breaking down the PE highlights by city, the paper tells us that 15% of the action (89 deals totaling $6.7 billion) went to Montreal-based companies. Companies based in Calgary and Montérègie each received a 9% share. This meant 54 deals for Calgary and 53 for Montérègie.

Breaking down the highlights by sector, 19% of the PE deals closed in industry/manufacturing. The next largest share was in information and communications technology (ICT), a 16% share. The report tells us that both of these two top sectors “have been receiving a steadily increasing share of PE deal flow since 2013 when industrial and manufacturing captured only a 14% share” and ICT got 10%.

The significance of the oil and gas sector in the PE world, at least as measured by closings, has been falling during the same 2013-2017 period. There were only 43 deals in this sector in 2017, compared to 98 deals for ICT and 117 for industry/manufacturing.

There was more than twice the number of PE exits in 2017 than there had been in 2016 (from 65 to 149).

Deal activity wasn’t limited merely to the headline making deals involving companies like DH or Garda. Deal activity in all of the small to mid-sized segments of the markets in 2017 exceeded 2016 numbers. For example, in the segment between $25 million and $100 million there were 49 deals in 2016, but 69 in 2017. In the segment running from $100 million to $500 million there were 14 deals in 2016, but twice that (28) in 2017.

Authors

The CVCA credits this report to Darrell Pinto, Carolyn Goard, and David Kornacki.

Pinto oversees for the CVCA all data related to Canadian private capital investments, exits, and fundraising activities. He has held senior positions at the Toronto Stock Exchange, the Institutional Limited Partners Association, and Thomson Reuters.

Goard oversees all of CVCA’s communications and marketing efforts.

Kornacki is responsible for monitoring industry activity and maintaining the CVCA’s Infobase.

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