H1 2018: Third $1B Quarter In Last Twelve Months Propels VC Momentum; All PE Segments Slowing With Overall Activity Eclipsed By Two Mega Deals
VC: Five-year upward trend shows no signs of slowing for the remainder of 2018
Venture capital investment in Canada continued its five-year upward trajectory in the first half of 2018 showing no signs of slowing for the remainder of the year. Almost $1B was invested over 166 deals in Q2, bringing the year-to-date (YTD) total VC investment to $1.7B — 7% higher than H12017. Q22018 is the third time since January 2017 where VC investment in Canada has surmounted $1B.
There were 16 exits so far in 2018 continuing the rebound from last year. These included the $141M corporate acquisition by Eli Lilly of AurKa Pharma, a TVM Life Sciences Management portfolio company and the $100M transaction in Coveo Solutions Incorporated by a U.S.-based private equity firm.
Keeping pace with the last two years, there were seven mega deals ($50M+) in the first half of 2018, totalling almost a half a billion dollars. Of the seven, Toronto-based Ritual raised $90M in a series C round led by Georgian Partners. Toronto-based ecobee Inc received $80M in series C financing which included participation from Relay Ventures. Ecobee Inc also received a $47M follow-on investment from BDC Capital and Caisse de dépôt et placement du Québec. Toronto-based TouchBistro Inc. raised $72M in a series D round from a syndicate led by OMERS Ventures and included participation from BDC IT Venture Fund and Relay Ventures.
ICT companies continue to receive the majority (64%) of total VC dollars invested in the first half of 2018 ($1.1B over 189 deals) with life sciences ($204M over 48 deals) and cleantech ($192M over 28 deals) companies receiving an equal 12% share.
PE: Mega deals in H1 doubles its share compared to the three previous years
Private equity investment in Canada continued its downward trend in the first half of 2018. $7.6B was invested over 146 PE deals in Q2, bringing the year-to-date (YTD) total to $14.5B over 288 deals. So far in 2018, overall investment was bloated by two mega deals ($2.5B+) which made up 69% of total dollars invested. In comparison, mega deals made up only 51% of dollars invested in H12017 and 0% in H1 2016.
The momentum in exits also shifted downward in H1 with only 41 exits ($10.5B) compared to 152 exits ($11.5B) in 2017. There were two IPO exits which included Quebec-based IPL Incorporated (TSE: IPLP) with a market cap of $709M, backed by Caisse de dépôt et placement du Québec (CDPQ),Fonds de solidarité (FTQ) and Investissement Québec and ONCAP-backed BC-based Pinnacle Renewable Energy Incorporated (TSE: PL).
The two mega deals accounted for three quarters (69%) of YTD investment in 2018 and included the $5.1B recapitalization of Ontario-based GFL Environmental Incorporated by a consortium which included Ontario Teachers’ Pension Plan (OTPP) and the OMERS Private Equity sale of its position in Husky Injection Molding Systems Limited to a U.S. PE firm via a $5B secondary buyout.