CVCA H1 2017 Quarterly Exclusive: Rebound Year For PE Exits
This article is part of a new series, CVCA Quarterly Exclusive, written and published by the Canadian Venture Capital and Private Equity Association. This series provides an analysis of the CVCA’s most recently published VC & PE Canadian Market Overview through expert commentary and perspectives.
The recently released H1 2017 VC & PE Canadian Market Overview noted a conspicuous spike in private equity exits. With a whopping 80 exits seen in the first half of this year alone, Canada has seen its biggest year for PE exits since 2013.
According to the CVCA’s Research Director, Darrell Pinto, the rebound in Canadian exits is derivative of a global phenomenon that this asset class has been experiencing, namely increasing institutional allocations to private equity via mega-buyout funds (funds raising more than $5 billion). Pinto says, “This massively concentrated dry powder has been fuelling larger-sized deals and exits around the world.”
In speaking to the conditions that created this exit environment, Alan Lever, Partner at Torquest Partners, says an increase in valuations are responsible. Lever explains that the increase in exit activity is being created by significantly increased deal valuations, which are subsequently driving M&A activity.
“In the private equity world, a lot of this is in turn driven by a very healthy financing market with increased leverage and aggressive terms,” Lever says. “Seems like things are likely to continue at this elevated level.”
The 80 Canadian exits in the first two quarters of 2017 include the $2.2B sale of Montreal-based Garda World Securities to Rhone Capital by Apax Partners, and two IPOs: the $445M dual listing of the iconic Canada Goose (TSX/NYSE: GOOS) as well as the $100M debut of STEP Energy Services Ltd. (TSX: STEP).
The Canada Goose IPO raised CAD $340M in its IPO and performed well on the first day of trading. The Toronto-based business went public on March 16, with its shares opening at $18 on the NYSE. Shares closed the day up more than 25 percent, slightly above $16. At the time, Canada Goose marked the second biggest IPO debut of 2017; trailing only Snap’s 44 per cent gain on its first day of trading earlier this month.
While the oil and gas sector dropped 19 per cent in activity in H1 2017 compared to 2013, STEP Energy Services Limited became the first energy company in two years to publicly list shares. The company raised CAD $100M in its IPO. STEP was hoping to sell its shares between $14 and $16 but settled on $10 per share; a result of slumping global oil prices.
To read more about private equity in the first half of 2017, read the full CVCA H1 2017 VC & PE Canadian Market Overview here.