BY Fraser Tennant
Canadian venture capital (VC) was strong in Q1 2017 while private equity (PE) was sluggish, according to a report published this week by the Canadian Venture Capital Association (CVCA).
In ‘Q1 2017 VC & PE Canadian Market Overview’ the CVCA reveals that VC saw $905m invested across 98 deals (Q1 2016 saw $956m invested over 128 deals). In comparison, PE continued at a slower pace in Q1, with $2.8bn invested over 105 deals.
Among its key findings, the report confirms that the average VC deal spiked to $9.2m in Q1 – 84 percent higher than the quarterly average deal size of $5m for the period of 2013 to 2016. Furthermore, the top 10 deals in Q1 accounted for 68 percent of all VC dollars invested, with the quarter also marking an acceleration of VC exits totalling $255m – nearly one-third of the number of deals and half the dollar amount of all 2016 VC exits.
“Canadian VC experienced a robust first quarter in 2017 – the second-best quarter since 2013,” said Darrell Pinto, research director at CVCA. “The pace of investment is reflective of healthy deal flow across all industry sectors. Another sign of a heath is the long-awaited turnaround trend in VC-backed exits – 10 exits totalling $179m in Q1 (compared to 31 exits in all of 2016) – and by all indications this will continue in Q2.”
Turning to PE performance, almost half of PE investments came from the two largest deals in Q1: the $723m Manitoba-based Arctic Glacier acquisition by The Carlyle Group from H.I.G. Capital and the $575m sale of British Columbia-based Performance Sports Group’s assets to Antares Capital and Fairfax Financial. The Arctic Glacier acquisition propelled Manitoba to the top-ranked provincial share of PE dollars invested (26 percent). This was followed by Quebec on 24 percent and British Columbia on 21 percent.
“PE remained flat in Q1,” confirms Mr Pinto. “As depressed global oil prices continue to put downward pressure on Canadian PE activity, investors have been finding alternate investment targets in non-traditional sectors like consumer and retail and cleantech. However, a bright spot was the PE exits environment, with 31 exits totalling $1.5m – already half the number of 2016 PE exits. This included the first PE-backed IPO since 2015: the $445m Canada Goose listing on both TSX and NYSE.”
Progressing in a balanced fashion, Canadian VC and PE investment is showing results.