BY Fraser Tennant
The Canadian private equity (PE) landscape continues to navigate market dynamics with resilience and adaptability, according to a new report by the Canadian Venture Capital and Private Equity Association (CVCA).
In its ‘H1 2023 Canadian Private Equity Market Overview’, the CVCA reveals that C$1.6bn was raised across 161 deals in Q2 – a 4 percent increase in deal volume compared to Q1 2023.
Moreover, despite a 19 percent decline in disbursed capital, the PE industry has maintained a strategic focus on smaller investments and sectors aligned with sustainable growth. The average deal size declined by 22 percent to C$10m, reflecting the industry’s preference for smaller investments.
“The Canadian PE sector’s approach to investment and focus on sustainable growth strategies reflect a resilient response to market dynamics,” said Kim Furlong, chief executive of the CVCA. “Investors have shown cautious optimism, remaining committed to the mid-market and choosing sectors with longer-term potential, such as information and communications technology (ICT) and cleantech.”
Sector-wise, ICT claimed the top spot with C$936m invested across 64 deals, contributing to 26 percent of total investment value. The cleantech sector continues to shine, surpassing previous years’ performance with C$885m invested across 16 deals, underscoring the growing focus on climate issues and solutions.
As far as buyout and add-on investment activity is concerned, the industry experienced a decline, with C$435m raised from 47 deals in Q2, reflecting a 50 percent reduction in deal value. However, despite the challenges posed by rising interest rates, investors remain committed to smaller deals that align with their strategies.
In terms of the exit landscape, there were 46 exits totalling C$139m in H1 2023. M&A transactions accounted for 80 percent of exits, while exits via a secondary buyout represented the remaining 20 percent.
“Canada’s PE landscape remains strong in the mid-market,” concludes Ms Furlong. “Opportunities to assist on succession planning and the growth of small and medium sized companies continue to dominate.”