Canadian private equity slows while VC heats up

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Funding and development concept as a human hand giving or taking investment from a business pie chart made of mechanical gears and cog wheels as a financial backing symbol of investing support or charity donation to help a struggling company or person.© lightwise /123RF Stock PhotosCompared to the same time last year, 2019’s first quarter saw 72 per cent less allocated to Canadian private equity deals, according to new data from the Canadian Venture Capital and Private Equity Association.

Nevertheless the asset class saw 130 deals over the quarter, with $1.9 billion invested. About a third of private equity deals in the first quarter were in the information and communication technologies sector, taking in almost half of new capital at $929 million.  Notably, 40 per cent of deals in the quarter were debt transactions, with an average deal size of $11.8 million, 1.5 times higher than the average seen in the first quarter of 2018.

“Our private equity members are reporting that the current high valuation environment continues to impact their deal flow,” said Kim Furlong, chief executive officer of the CVCA, in the report. “While the first quarter was slow, we anticipate that private equity activity will rebound in subsequent quarters.”

By contrast, Canadian venture capital had an exemplary quarter, with $1 billion invested across 142 deals. It represents the fifth $1 billion quarter since 2013 and was 48 per cent higher than VC capital invested in 2018’s first quarter.

Several mega deals, of $50 million or more, contributed to the high VC numbers, accounting for 57 per cent of all dollars invested. “It’s great to see continued momentum across the Canadian VC industry with this fifth billion-dollar quarter in less than 10 years,” said Furlong.

VC businesses in Ontario saw the highest new investment, totalling $481 million, trailed by Quebec which scooped up $198 million, while British Columbia-based companies took in $173 million. Information and communication technologies were by far the most popular sector, pulling in $616 million over 80 deals, followed by cleantech with $201 million and life science with $145 million.

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