Canadian PE and VC investment divergent in H1 2018

BY Fraser Tennant

Private equity (PE) and venture capital (VC) investment in Canada has been divergent in the first half (H1) of 2018, with activity trending downward and upward respectively, according to a new report by the Canadian Venture Capital & Private Equity Association (CVCA).

In its ‘VC & PE Canadian Market Overview H1 2018’, the CVCA notes that $7.6bn was invested across 146 PE deals in Q2, bringing the year-to-date (YTD) total to $14.5bn across 288 deals. Much of this investment was due to two mega deals which made up 69 percent of total dollars invested. In comparison, mega deals made up 51 percent of dollars invested in H1 2017.

Further key findings in the Canadian PE investment space include a sharp drop in the number of exits in H1 2018, with only 41 exits ($10.5bn) compared to 152 exits ($11.5bn) in H1 2017.

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

Unlike PE, VC investment is on an upward trajectory and shows no signs of slowing for the remainder of 2018. Indeed, almost $1bn was invested over 166 deals in Q2, bringing the year-to-date (YTD) total VC investment to $1.7bn – 7 percent higher than H1 2017. Moreover, Q2 2018 is the third time since January 2017 where VC investment in Canada has surmounted $1bn.

Additional key findings in the Canadian VC investment space include an average deal size of $6m, which represents a 28 percent increase from the previous quarter and 13 percent higher than the average deal size in the five-year period between 2013 and 2017 ($5.3m).

“Innovation in Canada is enjoying the best VC investment climate in well over a decade,” continued Mr Woollatt. “We are consistently observing an increase in size and volume of deals at all stages, plus, a welcome resurgence in exits. We are bracing for 2018 to be another record year.”

Report: VC & PE Canadian Market Overview H1 2018

Apollo agrees $2.6bn Aspen deal

BY Richard Summerfield

Investment funds associated with Apollo Global Management have agreed to acquire Aspen Insurance Holdings Ltd in an all-cash transaction valued at $2.6bn.

The deal, which has been approved by Aspen’s board of directors, will see the Apollo Funds acquire all of the outstanding shares of Aspen for $42.75 per share in cash. The transaction is expected to close in the first half of 2019, subject to the approval of regulators and Aspen’s shareholders, as well as the satisfaction of other closing conditions. The funds are paying around a 7 percent premium to Aspen’s closing share price on the day before the deal was announced.

“We are tremendously excited for the Apollo Funds to acquire Aspen,” said Alex Humphreys, a partner at Apollo. “We believe that Aspen benefits from strong underwriting talent, specialized expertise and longstanding client relationships which makes them well positioned in the market. We look forward to working with Aspen to build on the existing high quality specialty insurance and reinsurance business and we aim to leverage Apollo’s resources and deep expertise in financial services to support the company as it embarks on its next chapter.”

“We are delighted to have reached this agreement with the Apollo Funds,” said Glyn Jones, chairman of Aspen’s board of directors. “This transaction, which is the outcome of a thorough strategic review by Aspen’s board of directors, provides shareholders with immediate value and will allow Aspen to work with an investor that has substantial expertise and a successful track record in the (re)insurance industry.”

“This transaction is a testament to the strength of Aspen’s franchise, the quality of our business and the talent and expertise of our people,” said Chris O’Kane, Aspen’s chief executive. “Under the ownership of the Apollo Funds, Aspen will have additional scale and access to Apollo’s investment and strategic guidance, which will help us to accelerate our strategy and take Aspen to the next level. We are excited about the future as we embark on a new chapter in our history with a partner that understands our strengths, culture and customer-centric philosophy.”

Aspen has been up for sale for some time and Apollo has long been touted as a potential acquirer for the company. Aspen reported a loss of about $15m in the second quarter of 2018, continuing its run of poor financial returns. The company has suffered losses in three out of the last four quarters, having been adversely affected by hurricanes, wildfires and earthquakes.

News: Apollo Agrees to Acquire Aspen Insurance for $2.6 Billion

Santos to acquire Quadrant for $2.15bn

BY Richard Summerfield

Santos Ltd, Australia’s second largest independent oil & gas producer, is to acquire privately held Quadrant Energy for at least $2.15bn.

The deal will provide Santos with a strong boost to its domestic natural gas offering as it will gain access to Quadrant’s 80 percent stake in the Dorado oil field, which Quadrant’s partner Carnarvon Petroleum recently called a “truly incredible” oil discovery. The field has been found to have around 171 million barrels of oil, making it one of the biggest discoveries in the region for around 30 years as well as one of the largest oil resources ever found on the North West Shelf.

Under the terms of the deal, Santos has agreed a $2.15bn base price for Quadrant; however, the company has agreed to pay $50m for certified resources of 100 million barrels for the Dorado field, and then $2 a barrel extra for reserves of between 100 million and 125 million barrels, and $2.50 a barrel for reserves above 125 million.

“This acquisition delivers increased ownership and operatorship of a high-quality portfolio of low cost, long-life conventional Western Australian natural gas assets which are well known to Santos, and importantly significantly strengthens Santos’ offshore operating capability,” said Kevin Gallagher, managing director of Santos. “It is materially value-accretive for Santos shareholders and advances Santos’ aim to be Australia’s leading domestic natural gas supplier.”

“We have delivered operational excellence, outstanding results in our exploration program and successfully integrated an entire new business model throughout the company,” said Brett Darley, chief executive of Quadrant. “All of this has been achieved with a strong focus on the environment, and the commitment to the health and safety of our people.

“On behalf of Quadrant Energy I would like to say how pleased I am to be part of this agreement with Santos and our business and people are well placed for this exciting new chapter as part of a national and international oil and gas producer.”

The deal for Quadrant, which is 36 percent owned by Brookfield Asset Management Inc and 22 percent by Macquarie Group Ltd, will be funded via existing cash resources and new debt facilities.

According to a statement from Santos, the two companies’ assets overlap in Western Australia, providing synergies estimated at $30m to $50m a year.

News: Australia's Santos expands with $2.15 billion Quadrant buy after spurning takeover

New report highlights lack of gender diversity in ASX 201-500 companies

BY Fraser Tennant

Women account for only 15.8 percent of board roles in ASX 201-500 companies, according to a new report – the first of its kind examining the state of gender diversity within small-cap companies – by the Australian Institute of Company Directors (AICD) and Heidrick & Struggles.

The ‘Beyond 200: A Study of Gender Diversity in ASX 201-500 companies’ report also reveals that there are signs that boards of newer companies and those chaired by individuals who also chair larger listed boards are leading the way towards greater gender diversity.

The report’s key findings include: (i) female representation on boards greatly declines beyond the ASX 200, falling from 27.9 percent across the ASX 200 to 15.8 percent across ASX 201-500 companies; (ii) newer companies are more likely to have greater gender diversity, with women accounting for 25.3 percent of directorships for companies listed in the last five years; and (iii) female representation rises to 22.9 percent on ASX 201-500 boards chaired by an ASX200 chair.

“This report indicates that there are larger obstacles to achieving greater gender diversity among companies outside the ASX200, given small board sizes and greater presence of founders and investors,” said Elizabeth Proust, chairman of the AICD. “However, it also shows chairs of larger companies are exerting their influence and newer companies have heard the message about the importance of diversity.”

In 2015, the AICD set a target for all boards to achieve gender diversity based on a strong body of evidence showing that diverse boards lead to better outcomes for shareholders and stakeholders alike. Further research showed that 30 percent is where ‘critical mass’ is reached in a group setting and the full benefits of diversity are realised.

The report also states that while the AICD has been tracking progress towards the 30 percent gender diversity target as far as ASX 200 boards are concerned for several years, it felt it was now time to “shine the spotlight” on small-cap companies.

Ms Proust concluded: “Greater gender diversity on boards of all sizes is fundamental to the future of good governance in this country. Continued advocacy, engagement and education is needed to see all boards reap the benefits of diversity.”

Report: Beyond 200: A Study of Gender Diversity in ASX 201-500 companies

Data scientists top UK CEO recruitment wishlist, claims new survey

BY Fraser Tennant

Illustrating their increasing role in supporting future business growth, data scientists have been named the most important workforce capability by UK chief executives, according to a new survey by KPMG.

In its ‘Growing pains: 2018 Global CEO Outlook’ report, KPMG states that more than two thirds of survey respondents (69 percent) named the data scientist role as important in supporting future growth plans, followed by emerging markets experts (57 percent) and emerging technology specialists (55 percent ), such as artificial intelligence professionals.

The KPMG analysis also suggests that firms should focus on the impact of technological disruption as well as considering business opportunities beyond domestic markets.

“UK CEOs are encouragingly bullish on their resourcing requirements and evidently more so than their counterparts elsewhere in the world,” said Mark Williamson, partner and head of the people consulting practice at KPMG in the UK. “This sends a powerful message to the world that UK business leaders can see past market uncertainty and are focused on future-proofing their operations.”

In order to respond to technological disruption, the report also notes that UK businesses need to treat technology disruption as part of an integral part of business strategy, and respond by looking at ways in which their workforce can change its size, shape and composition to meet the strategic demands of the next decade.

“Fundamentally, the nature of digital disruption is potentially transformative if approached with the right mindset,” continued Mr Williamson. “Technology disruption is becoming such an integral part of business strategy that we expect business leaders to increasingly establish their own training programmes and invest in external support.”

The KPMG report showcases the views of 150 UK leaders and a further 1150 chief executives across the globe.

Mr Williamson concluded: “UK business leaders are embracing digital disruption and are confident in the potential for automation to create jobs in the near future. The rise of the data scientist is clear evidence of this sentiment and shift in priorities within UK boardrooms.”

Report: ‘Growing pains: 2018 Global CEO Outlook’