Recession Fails to Dampen Canadian Buyouts

The economic doom and gloom that dominated the latter half of 2008 did not decimate Canada’s buyout industry, according to a report.

Deal activity in Canada’s buyout market demonstrated continuing resilience in 2008 with a level of investment activity comparable to 2006, reports Canada’s Venture Capital & Private Equity Association (CVCA) and its research partner, Thomson Reuters.

By the end of 2008, 112 transactions were completed or pending, of which 40 had a disclosed value of US$9.1 billion (C$11.3 billion). There were 104 transactions in 2006, of which 40 had a disclosed value of US$9.1 million (C$11.3 million).

Canadian buyout funds also raised C$5.6 billion in 2008, up 22% from 2007. This growth was in sharp contrast to the U.S. buyout industry, in which fundraising fell by 14% over the same period.

“Canada’s buyout industry proved to be resilient in 2008, reflecting a continuing appetite for mid-market transactions despite volatile public markets and a tighter credit environment,” says CVCA president Gregory Smith.

However, fourth-quarter numbers in 2008 did soften, with disclosed deal values totaling US$2.1 billion (C$2.6 billion)—up slightly from the US$1.8 billion invested in same period of 2007 but down from the US$3.0 billion invested in the third quarter of 2008. The buyout industry’s deal activity in 2008 reflected a significant contribution from U.S. investors, while Canadian firms invested a total of US$3.6 billion (C$4.5 billion) during the year—the lowest level of domestic contribution since 2005.

“These factors, which reflect the current economic turmoil, suggest that fundraising and investments will likely be more challenging in 2009, with investors being more selective in what they choose to pursue,” adds Smith.

This story was originally published by Canadian Insurance Top Broker.