David Stobbe, Reuters. Canadian Private Equity Buyout Review Full Year 2017

Transcription

1 David Stobbe, Reuters Canadian Private Equity Buyout Review Full Year 2017

2 Table of Contents Canada s PE Buyout Market Full Year $ 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: Full Year 2017 Canadian Buyout-PE Market Trends The 2017 year saw a strong finish for Canada s buyout and related private equity market. With a total of 360 transactions collectively valued at $33.4 billion, deal values increased by 91% from the previous year and reached its second highest level ever, only surpassed by the $33.7 billion invested in While the year-over-year increase in deal volumes of 15% was less spectacular, with 360 recorded deals 2017 remains the third most active year in Canadian buyout history, only behind 2014 and 2015, both of which saw figures in excess of 430. The fourth quarter, $5 billion secondary sale of Bolton, Ontario-based Husky Injection Moldings Systems by OMERS Private Equity and Berkshire Hathaway to US private equity firm Platinum Equity has earned it the number one spot in both our top deals list and top exits list for the year. It s joined at the top deals by the previously announced $4.8 billion acquisition of payments technology company DH Corp by Vista Equity Partners as well as by the $3.6 billion financing of SNC-Lavalin s purchase of British engineering company WS Atkins plc. Despite the number of Canadian Buyout-PE deals increasing 15% over the same period last year, the rate of overall Canadian M&A outpaced them. With 2,760 Canadian M&A targets in 2017 marking a 68% increase from the 1,638 a year previously, PE deals as a percentage of M&A dropped from 19% to 13%. Canadian Market Trends by Sector Business Service, Consumer Related, and Manufacturing companies were involved in the bulk of Canadian buyout deals during With 158 deals worth $17.8 billion, they represented 43.9% and 53.3% of deal volumes and dollars invested respectively. 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 three quarters 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 5.4% as of the end of Q3. This lags far behind their US counterparts which showed consistent outperformance of public markets and a since inception IRR of 12.5%.

4 Canadian Private Equity Buyout Market Activity: Full Year 2017 Canadian Market Trends by Region Companies based in Ontario have continued to see a steady increase in their involvement in PE-buyout deals, up to a third of all deals in 2017 compared to just a quarter in With only 48 deals, Alberta dropped down to 13% of all Canadian deals, its lowest share since Atlantic Canada-based businesses were involved in 15 financings, up 300% from Canadian Investor Activity in Global Markets Canadian buyout and related PE funds participated in 121 non-canadian deals throughout the year collectively valued at $70.7 billion. This represented a 17% increase in deal activity from 2016 but due to smaller disclosed deal amounts, deal values were down 33% on the year. 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 $7.0 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. PSP Investments was also involved in the $6.4 billion acquisition of Singapore-based renewable energy developer Equis Energy led by Global Infrastructure Partners. Trends in Canadian buyout-pe fundraising Onex Partners V completed its final close in the fourth quarter, raising C$9.1 billion and surpassing its C$8.3 billion target by 10%. Overall, $19.8 billion was raised by Canadian PE-buyout funds during 2017.

5 Deal Values ($ Billions) Historical Private Equity - Buyout Investment in Canadian Companies: Deal Values With $33.4 billion invested in 2017, Canadian Buyout investment reached its highest level in ten years, up 91% from the previous year. $40.0 $35.0 $30.0 $33.7 $31.0 $33.4 $25.0 $20.0 $24.0 $15.0 $15.9 $17.5 $10.0 $11.3 $12.8 $11.7 $10.5 $5.0 $0.0 $ Q1 Q2 Q3 Q4

6 # of Deals Historical Private Equity - Buyout Investment in Canadian Companies: Deal Volumes 360 deals were completed in 2017, up 15% from 2016 volumes but still down 19% from the all-time high of 445 deals performed in Q1 Q2 Q3 Q4

7 % of Deals PE-Buyout Dealmaking: Deals by Company Location Ontario, Quebec, and the rest of Canada each captured a third of all deals in With 15 deals occurring during the year, Atlantic Canada tripled its activity from % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Ontario Québec Alberta British Columbia Prairies Atlantic Canada Territories

8 # of Deals PE-Buyout Dealmaking: Deal Volumes by Transaction Type Add-on acquisitions made up 30% of all deals during 2017, indicating firms increasing commitment to building off of their existing platform companies and performing industry consolidation. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Control Stake Minority Stake Acquisition for Expansion Mezzanine PIPE Restructuring Other

9 # of Deals PE-Buyout Dealmaking: Deal Volumes by Nation of Lead Investor The proportion of buyout deals with a Canadian lead investor dropped to 68% over the course of the entirety of 2017, the lowest percentage since % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Canada United States Other Regions

10 # of Deals PE-Buyout Dealmaking Versus All M&A of Canadian Targets With Canadian M&A increasing at a faster pace than PE-buyout deals, the share of these deals dropped to just 12.1%, the lowest level since the third quarter of % % % 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 Q4'17 # of PE Deals PE Deals as % of all M&A Activity 0%

11 Top Canadian Private Equity Deals, Full Year 2017 Portfolio Company Investors Rank Company Name Deal Value ($ Millions) Location Sector Investing Firms (Disclosed) 1 Husky Injection Molding Systems $4,951.1 Bolton, ON Plastics Manufacturing Platinum Equity 2 DH Corporation $4,800.0 Toronto, ON Financial Technology Vista Equity Partners 3 SNC-Lavalin Group $3,600.0 Montreal, QC Project Management Caisse de dépôt et placement du Québec 4 Restaurant Brands International 5 Intact Financial $2,300.0 Toronto, ON Insurance 6 Milestone Apartments $1,731.9 Toronto, ON $2,366.3 Oakville, ON Food Service 3G Capital, Berkshire Hathaway Real Estate Management Caisse de dépôt et placement du Québec, CPPIB, Ontario Teachers Pension Plan Starwood Capital Group 7 Arctic Glacier $965.1 Winnipeg, MB Food Products Carlyle Global Partners 8 Teekay Offshore Partners $927.6 Vancouver, BC 9 Canam Group $ CQ Energy Canada Partnership Saint-Georges, QC Marine Energy Transportation Construction & Fabrication Brookfield Asset Management American Industrial Partners, Caisse de dépôt et placement du Québec, Fonds de solidarité FTQ $722.2 Calgary, AB Oil & Gas MIE Holdings, Can-China Global Resources Fund

12 Canadian PE-Buyout Investment by Deal Size Range Six deals with values greater than one billion dollars brought in $19.7 billion during 2017, the largest annual total since $2,025 $ $4,922 >= $1 Billion $500 - $999 Million 64 $6,407 $33.4 Billion Invested $19,749 $100 - $499 Million $10 - $99 Million < $10 Million Deals Deal Values Undisclosed 81

13 Canadian PE-Buyout Investment by Sector Companies within the business service, consumer related, and manufacturing sectors made up 44% of all deals in Investment in oil & gas dropped 48% from $4.6 billion across 49 deals in 2016 to just $2.4 billion towards 25 deals in Total # of Deals $8, Total Deal Values ($ Millions) 60 $7, $6, $5, $4,000 $3, $2, $1,000 0 $0 Business Services Consumer Related Manufacturing Software IT & Media Mining Healthcare & Life Sciences Oil & Gas 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 121 deals with non-canadian companies in 2017, up 17% in terms of volume from last year, but deal values dropped to $71 billion, down 33%. $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 Q4'17 0 Total Deal Values, Canadian & Non-Canadian Investors # of Deals

15 Top PE Investments by Canadian Firms in Non-Canadian Companies, Full Year 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 3 Equis Pte Ltd. $6.4 Singapore Investment Firm Caisse de dépôt et placement du Québec, PSP Investments, Blackstone Group, National Pension Service of Korea Canada Pension Plan Investment Board, Energy Capital Partners LLC, Access Industries PSP Investments, China Investment Corp, Global Infrastructure Holdings 4 USI Holdings Corp. $5.9 Valhalla, NY Insurance Caisse de dépôt et placement du Québec, KKR 5 Nord Anglia Education $5.8 Hong Kong Education 6 GE Water & Process Technologies $4.3 Feasterville-Trevose, PA Water Management 7 Cyxtera Technologies $3.8 Coral Gables, FL IT Security Canada Pension Plan Investment Board, Baring Private Equity Asia Caisse de dépôt et placement du Québec Longview Asset Management, BC Partners LLP, Medina Capital Partners 8 Cerba Healthcare SASU $2.6 Saint-Ouen-l'Aumône, FR Clinical Labs PSP Investments, Partners Group AG, 9 Gas Natural Fenosa $2.3 Barcelona, Spain Gas Distribution 10 Parkdean Resorts UK $2.2 Newcastle upon Tyne, UK Holiday Resorts Canada Pension Plan Investment Board, Allianz Capital Partners Onex Corp

16 PE-Buyout Fundraising by Canadian Firms Six buyout funds raised $7.1 billion in the fourth quarter of 2017, including the final close of Onex Partners V at $9.1 billion, bringing the overall fundraising count in 2017 to $19.8 billion. $50.0 $45.0 $40.0 $45.4 $35.0 $30.0 $25.0 $20.0 $15.0 $10.0 $5.0 $0.0 $19.8 $16.1 $14.7 $12.2 $11.1 $7.3 $

17 # of Exits Canadian PE-Backed Exits, Full Year exits were completed in 2017, up 27% from 2016 figures. Renewed interest in public offerings has resulted in PE-backed IPO s increasing to 11 from just 2 counts the year prior. Portfolio Company Investors Rank Company Name Deal Value ($ Millions) Location Sector Exiting Investors (Disclosed) 1 Husky Injection Molding Systems $4,951 Bolton, ON Plastics Manufacturing OMERS Private Equity, Berkshire Partners LLC 2 Reliance Home Comfort LP $4,566 Oshawa, ON HVAC Systems Alinda Capital Partners LLC 3 Atrium Innovations Inc $2,914 Westmount, QC Nutritional Products Permira Advisers LLP, Caisse de dépôt et placement du Québec, Fonds de solidarité FTQ 4 Performance Sports Group Ltd $771 Mississauga, ON Athletic Goods Kohlberg & Company LLC, Brookfield Asset Management 5 Daiya Foods Inc $409 Vancouver, BC Dairy Products Northwood Ventures 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 Q4'17 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% 12.5% 10% 10% 8% 8% 6% 5.4% 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 reports from Canadian and non-resident venture capital firms, private equity firms, law firms, and other service providers. 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 Friday, January 26th, 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: