PRELIMINARY LOOK: Q4 2019 VC & PE Canadian Market Overview

 

Canadian Venture Capital // Q4 2019.

According to preliminary data (final data is targeted to be published on March 11), Canadian venture capital investment crossed the CAD $1B mark for the third successive quarter in Q4 2019 with CAD $1.6B invested in 162 deals bringing the year-end total to CAD $6.2B over 552 deals. This is the highest amount since the CVCA began tracking statistics and is a staggering 69% higher than the CAD $3.7B invested in the previous year.

A record high 29 CAD $50M+ mega-deals accounted for 55% of total VC investments, up from its 33% share in 2018. A third of the deal flow was between CAD $1M-$5M (172 deals totaling CAD $408M). Excluding mega-deals, the average deal size in 2019 was CAD $5.3M, an 8% increase from the CAD $5M the previous year. A barometer of the strength of the Canadian VC market was that 10 of these 29 mega-deals were over CAD $100M and included :

  • CAD $515M VC growth financing of St. John’s-based Verafin from a syndicate of investors that included Information Venture Partners, BDC Co-Investments, Northleaf Capital and Teralys Capital
  • CAD $332M series D round in Vancouver-based Clio by US investors
  • CAD $265M series A round in Toronto-based 1Password by a syndicate of US Investors

VC Investment Trends

It was a very healthy year for VC-backed exits with 40 exits (compared to 35 in 2018) that included 3 IPOs:

  • Lightspeed POS Inc.’s unicorn-level debut on TMX with a market cap of CAD $1.1B. The company was backed by Caisse de dépôt et placement du Québec (CDPQ), iNovia Capital and Teralys Capital
  • Milestone Pharmaceuticals Inc. went public on NASDAQ valued at CAD $468M and backed by investors that included BDC Healthcare Fund and Fonds de solidarité FTQ
  • Lumira Ventures-backed Edesa’s RTO on NASDAQ with a market cap of CAD $49M

Canadian Private Equity // Q4 2019.

According to preliminary data (final data is targeted to be published on March 11), 2 CAD $1B+ mega-deals closed in Q4 making it the best quarter for PE in the last five years. The surge in the last quarter elevated PE activity for 2019 to a level comparable to previous years. 544 PE deals closed with a total value of CAD $19.5B, 14% shy of the CAD $22.7B mark in 2018, and 42% higher than its previous low of CAD $13.8B in 2016.

145 PE growth deals accounted for a quarter of all deal flow totaling CAD $2.6B (11% share of total dollars). These included the following disclosed deals:

  • CAD $102M investment by BDC Capital Inc., Fondaction CSN and Fonds de solidarité FTQ in Laval-based JLD-Laguë Group, with 400 employees in Montreal, Estrie, Laval, Laurentides, Saguenay and Ontario
  • CAD $95M by a US investor in Vancouver-based PDFTron Systems Inc., a female-founded tech company employing 47 employees
  • CAD $91M investment by InstarAGF Asset Management and PFM Capital Inc. in Calgary-based Steel Reef Infrastructure Corp. which employs 110 people and whose founder and executive chairman was honoured with the Saskatchewan Oilman of the Year award

For the second year in a row, the sum of all mega-deals exceeded the sum of all other deals combined: CAD $11.6B out of CAD $19.5B in 2019 and CAD $14.4B out of CAD $22.7B in 2018.  The 3 CAD $1B+ mega-deals this year included:

  • CAD $5.2B recap of Montreal-based Garda World Security Corp. by a European investor
  • CAD $5B buyout of Calgary-based WestJet Airlines Ltd. by ONEX
  • CAD $1.4B buyout of Autodata Solutions Inc. by a US PE firm

PE Investment Trends

The dollar share of mid-market deals between CAD $100M and CAD $500M, typically a sweet spot for Canadian PE deal flow, increased to 21% (CAD $4.1B) compared to 19% (CAD $4.2B) in 2018. The largest of these disclosed deals included:

  • CAD $445M privatization of TMX-listed Gluskin Sheff + Associates Inc. by ONEX
  • CAD $414M buyout by a European investor of Cobalt 27 Capital, listed on TMX, and subsequent re-listing on TSX Venture under Conic Metals Capital Corp.
  • CAD $385M PE recapitalization by Caisse de dépôt et placement du Québec (CDPQ) of Montreal-based Quebec Iron Ore, a subsidiary of TSX-listed Champion Iron Limited, with operations in northern Quebec

The slower exit market for Canadian PE-backed companies continued with only 44 acquisitions in 2019, down significantly from the 83 acquisitions and 4 IPOs in 2018. These included:

  • CAD $753M acquisition of HarbourVest-backed, Toronto-based Intelex Technologies Inc. by Industrial Scientific
  • CAD $425M acquisition by Hostess Brands of Swander Pace Capital’s Burlington-based Voortman Cookies Limited
  • $337M acquisition of Dartmouth-based Nova Cold Logistics from Brookfield Asset Management

Participating Data Contributors


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