Mark Blinch, Reuters. Canadian Private Equity Buyout Review First Three Quarters 2017

Transcription

1 Mark Blinch, Reuters Canadian Private Equity Buyout Review First Three Quarters 2017

2 Table of Contents Canada s PE Buyout Market first 3Q $ Invested and # Companies Financed 5 Investment by Company Location 7 Investment by Transaction Type 8 Investment by Investor Location 9 PE Investment vs. all Canadian M&A 10 Top PE Buyout Deals 11 Investment by Deal Size 12 Investment by Company Sector 13 Canadian Firms Investment Abroad 14 Buyout Funds Raised 16 PE Buyout-Backed Exits 17 PE Buyout Returns 18 Explanatory Notes & Contacts 19

3 Canadian Private Equity Buyout Market Activity: First Three Quarters 2017 Canadian Buyout-PE Market Trends Deal-making activity in Canada s buyout and related private equity market continued at a very strong pace in the third quarter. With a total of 261 transactions collectively valued at $23.8 billion during the first three quarters of the year, deal values increased by 73% from the same period last year and saw the strongest first three quarters in history. Despite the huge increase in dollars invested, the actual number of deals that took place in the first nine months of 2017 only increased by 8% over the previous year to 261. Two additional deals joined the $1 billion or greater club during the third quarter of Caisse de dépôt et placement du Québec (CDPQ) helped fund SNC-Lavalin s $3.6 billion acquisition of British engineering and design company WS Atkins plc, which closed in July. CDPQ was again involved in Intact Financial s announced plan to acquire OneBeacon Insurance Group for $2.3 billion, this time joined by Canada Pension Plan Investment Board (CPPIB) and Ontario Teachers Pension Plan (OTPP). Although the number of Canadian Buyout-PE deals increased slightly over the same period last year, the rate of overall Canadian M&A largely outpaced them. With 1,918 Canadian M&A targets in the first three quarters of 2017 marking a 66% increased from the 1,157 a year previously, PE deals as a percentage of M&A dropped from 21% to 14%. Canadian Market Trends by Sector Business Service, Consumer Related, and Financing companies were involved in 93, or 36%, of all deals in the first three quarters of However, due to a number of mega-deals, these three sectors alone managed to receive 72% of all financing dollars during the period. Canadian Fund Performance The performance of Canadian buyout, mezzanine, and private equity energy funds continued to show slight underperformance to public market comparators in the first half of Final data provided by Cambridge Associates shows Canadian buyout, private equity energy, and subordinated capital funds with vintage years of 2000 or greater returning a since inception IRR of 5.2% as of the end of Q2. This lags far behind their US counterparts which showed consistent outperformance of public markets and a since inception IRR of 12.7%.

4 Canadian Private Equity Buyout Market Activity: First Three Quarters 2017 Canadian Market Trends by Region Companies outside of Ontario or Quebec are beginning to see a gradual increase in the number of deals they re involved in, making up 36% of all investments in the first three quarters of 2017, a five year high. However, it s clear that the two most populated provinces are still receiving the bulk of the dollars invested at 88% of disclosed deal values. In terms of the mega-deals, of the five deals that broke the $1 billion mark in 2017, four of these companies were based in Ontario. Canadian Investor Activity in Global Markets Canadian buyout and related PE funds participated in 25 non-canadian deals in the third quarter collectively valued at $15.8 billion. This brought the total number of non-canadian deals to 88 for the first three quarters of the year, a 7% increase from the same period in La Caisse de dépôt et placement du Québec was involved in the $8.0 billion acquisition of Tennessee-based TeamHealth Holdings as well as the $5.9 billion investment in New York-based USI Holdings. Canada Pension Plan Investment Board invested $750 million in the $5.6 billion Calpine Corporation acquisition led by Energy Capital Partners. CPPIB also partnered up with Baring Private Equity Asia to take Hong Kong school organization Nord Anglia Education private for $5.8 billion. Trends in Canadian buyout-pe fundraising In July, Onex Corp completed the first closing of its new flagship fund, Onex Partners V, raising $6.5 billion or 80% of its target. This represented the lion s share of the $7.5 billion PE fundraising that occurred during Q3, bumping the total funds raised so far in 2017 up to $12.7 billion.

5 Deal Values ($ Billions) Historical Private Equity - Buyout Investment in Canadian Companies: Deal Values With $9.3 billion invested in Q3, Canada saw both its strongest single quarter in two years, and the second strongest January to September ever recorded $33.2 $ $24.0 $ $15.7 $ $12.7 $11.7 $ $5.6 $ Q1 Q2 Q3 Q4

6 # of Deals Historical Private Equity - Buyout Investment in Canadian Companies: Deal Volumes Deal volumes in the first three quarters were up 8% over the same period last year, but were still down 20% from the all-time high of 326 deals from January to September Q1 Q2 Q3 Q4

7 % of Deals PE-Buyout Dealmaking: Deals by Company Location Capital is being spread across Canada, with companies based outside of Ontario or Quebec making up 36% of deals in the first three quarters of 2017, a five-year high. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% First 3Q 2017 Ontario Québec Alberta British Columbia Prairies Atlantic Canada Territories

8 # of Deals PE-Buyout Dealmaking: Deal Volumes by Transaction Type Acquisition for expansions made up 29% of all deals in the first three quarters of 2017, continuing their steady increase of every year since 2008, when they only made up a 4% share of the market. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% First 3Q 2017 Control Stake Minority Stake Acquisition for Expansion Mezzanine PIPE Restructuring Other

9 # of Deals PE-Buyout Dealmaking: Deal Volumes by Nation of Lead Investor Canadian investors led 77% of all PE deals in the third quarter, a level higher than any annual average since % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% First 3Q 2017 Canada United States Other Regions

10 # of Deals PE-Buyout Dealmaking Versus All M&A of Canadian Targets While the number of Canadian M&A deals in the first three quarters of 2017 increased 66% from the same period last year, the PE share of these deals decreased from 21% to 14% % % % 80 20% 60 15% 40 10% 20 5% 0 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 # of PE Deals PE Deals as % of all M&A Activity 0%

11 Top Canadian Private Equity Deals, First Three Quarters 2017 Portfolio Company Investors Rank Company Name Deal Value ($ Millions) Location Sector Investing Firms (Disclosed) 1 DH Corporation $4,800.0 Toronto, ON Financial Technology Vista Equity Partners 2 SNC-Lavalin Group $3,600.0 Montreal, QC Project Management Caisse de dépôt et placement du Québec 3 Restaurant Brands International $2,366.3 Oakville, ON Food Service 3G Capital, Berkshire Hathaway 4 Intact Financial $2,300.0 Toronto, ON Insurance 5 Milestone Apartments $1,738.6 Toronto, ON Real Estate Management Caisse de dépôt et placement du Québec, CPPIB, Ontario Teachers Pension Plan Starwood Capital Group 6 Arctic Glacier $965.1 Winnipeg, MB Food Products Carlyle Global Partners 7 Canam Group $875.0 Saint-Georges QC Construction & Fabrication 8 Osisko Gold Royalties $675.0 Montreal, QC Precious Metals 9 Loblaw s Gas Station Business Unit American Industrial Partners Caisse de dépôt et placement du Québec, Fonds de solidarité FTQ $547.6 Toronto, ON Gas Stations Brookfield Asset Management 10 Sandvine $545.4 Waterloo, ON Network Solutions Francisco Partners

12 Canadian PE-Buyout Investment by Deal Size Range Investors remain focused on larger deal sizes, with investments of $100 million or greater making up 11% of all deals, the highest level since $1,259 $ $3,948 >= $1 Billion $500 - $999 Million 43 $3,600 $23.8 Billion Invested $14,798 $100 - $499 Million $10 - $99 Million < $10 Million Deals Deal Values Undisclosed 62

13 Canadian PE-Buyout Investment by Sector Despite companies within the Finance sector only making up 4% of all PE deals in the first three quarters of 2017, they received 30% of all investment dollars, largely from DH Corp and Intact Financial. 50 First 3Q 2017 Total # of Deals $8,000 First 3Q 2017 Total Deal Values ($ Millions) $7,000 $6, $5, $4, $3,000 $2,000 5 $1,000 0 $0 Business Services Consumer Related Manufacturing Software IT & Media Mining Oil & Gas Healthcare & Life Sciences Finance Energy & Environmental Forestry & Agriculture Transportation

14 Deal Values ($ Billions) # of Deals PE Investments by Canadian Firms in non-canadian Companies Canadian firms participated in 88 deals with non-canadian companies in the first three quarters of 2017, up 7% from last year, but total deal values dropped to $53 billion, down 32%. $45 $40 $35 $ $25 $20 $15 $10 $ $0 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 0 Total Deal Values, Canadian & Non-Canadian Investors # of Deals

15 Top PE Investments by Canadian Firms in Non-Canadian Companies, First 3Q 2017 Portfolio Company Investors Rank Company Name Deal Value ($ Billions) 1 TeamHealth Holdings $8.0 Knoxville, TN Location Sector Investing Firms (Disclosed) Healthcare Services 2 Calpine Corp. $7.0 Houston, TX Power Generation Caisse de dépôt et placement du Québec, Blackstone Group, PSP Investments, National Pension Service of Korea Canada Pension Plan Investment Board, Energy Capital Partners LLC, Access Industries 3 USI Holdings Corp. $5.9 Valhalla, NY Insurance Caisse de dépôt et placement du Québec, KKR 4 Nord Anglia Education $5.8 Hong Kong Education 5 Dubai Aerospace Enterprise $2.9 Dubai, UAE Aerospace Canada Pension Plan Investment Board, Baring Private Equity Asia Canada Pension Plan Investment Board, Terra Firma Capital Partners 6 Cerba Healthcare SASU $2.6 Saint-Ouen-l'Aumône, FR Clinical Labs Partners Group AG, PSP Investments 7 Gas Natural Fenosa $2.3 Barcelona, Spain Gas Distribution Canada Pension Plan Investment Board, Allianz Capital Partners 8 Parkdean Resorts UK Ltd. $2.2 Newcastle, UK Holiday Resorts ONEX Corporation 9 FTP Power LLC $2.0 Salt Lake City, UT Solar Energy Alberta Investment Management Corp, AES Corporation 10 Virtu Financial LLC $1.9 New York, NY Financial Services PSP Investments, North Island, GIC

16 PE-Buyout Fundraising by Canadian Firms Six buyout funds raised $7.5 billion in the third quarter of 2017, including the $6.5 billion initial July closing of Onex s new flagship fund, Onex Partners V. $50.0 $45.0 $40.0 $45.4 $35.0 $30.0 $25.0 $20.0 $15.0 $10.0 $5.0 $0.0 $16.1 $14.7 $12.2 $11.1 $12.7 $7.3 $ First 3Q 2017

17 # of Exits Canadian PE-Backed Exits, First 3Q disclosed exits were completed in the first three quarters of 2017, up 14% compared to the same period last year. Portfolio Company Investors Rank Company Name Deal Value ($ Millions) Location Sector Investors (Disclosed) 1 Reliance Home Comfort LP $4,566 Oshawa, ON HVAC Systems Alinda Capital Partners 2 Performance Sports Group Ltd $771 Mississauga, ON Athletic Goods Kohlberg & Company LLC, Brookfield Asset Management 3 Daiya Foods Inc $409 Vancouver, BC Food Retailer Northwood Ventures, Stockton Road Capital 4 Canada Goose $391 Toronto, ON Clothing Retailer Bain Capital 5 Spur Resources Ltd $388 Calgary, AB Oil & Gas PFM Capital Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 M&A Public Secondary Sale

18 Cambridge Associates: Private Equity Fund Performance Canadian private independent funds holding positive returns, but fall below public market benchmarks and US-based funds. Canada 14% 12% United States 14% 12% 12.7% 10% 10% 8% 8% 6% 5.2% 6% 4% 4% 2% 2% 0% Q Q Q Q Q Q % Q Q Q Q Q Q Buyout, Private Equity Energy & Subordinated Capital Funds Buyout, Private Equity Energy & Subordinated Capital Funds mpme: S&P/TSX 60 Index mpme S&P 500 Index Source: Cambridge Associates, Standard & Poor's

19 Explanatory Notes 1. Data collected and analyzed by Thomson Reuters for this statistical report were drawn from a variety of sources including Thomson Reuters M&A databases, regulatory filings, press releases, and proprietary investor reports from Canadian and non-resident fund managers. 2. Key statistical indicators (e.g., total disbursements, per quarter or per annum) are influenced by the fact that a substantial fraction of buyout and other PE deals are not fully disclosed. For instance, dollars invested in a given period pertain only to those deals with values that have been published or confidentially disclosed to Thomson Reuters. 3. The data also highlight the deal-making of Canadian funds in non-canadian companies. Dollars invested pertain to the total value of disclosed deals in which Canadian funds have participated and not the specific Canadian financial contributions to these deals. Deals are first tracked as of announcement date, then tracked as of completion date upon closing. 4. Statistical data reflect all essential forms of buyout-pe deal-making, including control-stake acquisitions of businesses, minority equity investments, restructuring and special-situations transactions, mezzanine deals over $3 million, acquisitions for expansion and other quasi-equity investments. 5. Fund performance data and public market equivalents are produced via the Cambridge Associates Benchmark Calculator, available through Thomson Reuters Eikon. Returns are for Canadian and US buyout, private equity energy, and subordinated capital funds with vintage years of 2000 or greater, on a first cash flow basis, in Canadian dollars, from inception to the end of the indicated quarter, under final data mode Q Pooled internal rates of return are net of fees, expenses and carried interest. CA Modified Public Market Equivalent (mpme) replicates private investment performance under public market conditions. The public index s shares are purchased and sold according to the private fund cash flow schedule, with distributions calculated in the same proportion as the private fund, and mpme NAV is a function of mpme cash flows and public index returns. 6. All current and previous years data is as of Monday, October 30th, Data is continuously updated and is therefore subject to change. All figures are in Canadian dollars unless otherwise noted. For further information on Thomson Reuters venture capital and private equity offerings, please visit us at: For further reports on private equity, venture capital, and other asset classes, please visit us at: Contributors to this analysis are provided with additional packages of data. If you would like to participate in the submission process, receive quarterly press releases, or have questions about our venture capital criteria, please contact us at: Gavin Penny Greg Beaman gavin.penny@thomsonreuters.com greg.beaman@thomsonreuters.com Tel: Tel: