Todd Korol, Reuters. Canadian Private Equity Buyout Review First Quarter 2018

Transcription

1 Todd Korol, Reuters Canadian Private Equity Buyout Review First Quarter 2018

2 Table of Contents Canada s PE Buyout Market in Q $ 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 Quarter 2018 Canadian Buyout-PE Market Trends The first quarter of 2018 within Canada s buyout and related private equity market saw a total of 81 transactions collectively valued at $13.3 billion. Deal values increased by 98% from the same period of the previous year and reached the highest level ever recorded for any Q1. Deal volumes saw a year-overyear decrease of 15%, resulting in an average disclosed deal value of $349 million, also the highest ever reported. The March closing of the $5 billion secondary sale of Bolton, Ontario-based Husky Injection Moldings Systems, originally announced last December, by OMERS Private Equity and Berkshire Hathaway to US private equity firm Platinum Equity has retained the number one spot in both Canada s top deals list and top exits list. Other top deals during the quarter were the announced $3.8 billion acquisition of industrial properties portfolio operator Pure Industrial Real Estate Trust by Blackstone Group as well as the $1.6 billion agreement by Wolf Midstream to acquire MEG s 50% ownership interested in Access Pipeline, financed by Canada Pension Plan Investment Board. Although the number of PE deals during the quarter dropped 15% from the previous year, the rate of overall Canadian M&A fell an even further 19%. With 597 Canadian M&A targets in Q versus 738 in Q1 2017, PE deals as a percentage of M&A increased from 12.9% to 13.6%. Canadian Market Trends by Sector The Manufacturing and Business Service sectors remained the most active during Q1 2018, with total deal values of $5.0 billion and $4.5 billion respectively, or 38% and 34% of the overall dollar values during the term. Canadian Fund Performance The performance of Canadian buyout, mezzanine, and private equity energy funds continued to show slight underperformance to public market comparators through to the end of Preliminary 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 5.5% as of the end of Q4. This lags far behind their US counterparts which showed consistent outperformance of public markets and a since inception IRR of 13.5%.

4 Canadian Private Equity Buyout Market Activity: First Quarter 2018 Canadian Market Trends by Region Companies based in Québec received the largest share of investment volumes throughout the first quarter of 2018, with 38% of all financings. Ontario s portion dropped slightly from 33% of volumes over the course of 2017 to 30% during the first three months. British Columbia saw 14% of all deals, showing a steady state of improvement since 2015 when it held a six-year low of 8%. Canadian Investor Activity in Global Markets Canadian buyout and related PE funds participated in 25 non-canadian deals during Q1 collectively valued at $48 billion. Consequently, despite deal volumes remaining flat year-over-year, deal values were up 229%. This deal value figure comes as a result of a number of mega deals occurring during the quarter. Thomson Reuters announced the sale of a 55% stake of its Financial & Risk business to a consortium led by Blackstone Group in a deal valued at $21.0 billion. Other investment partners involved in the deal included Canada Pension Plan Investment Board and Singapore sovereign wealth fund GIC. Brookfield Asset Management also agreed to a takeover of Chicago-based U.S. mall owner GGP for a cash consideration of $11.9 billion. An investor group led by US-based energy infrastructure firm Energy Capital Partners and including Canada Pension Plan Investment Board also completed the acquisition of Houston-based power generation company Calpine Corporation for $7.2 billion. Trends in Canadian buyout-pe fundraising In a February closing Whitehorse Liquidity Partners raised $920 million for its second fund focusing on the secondary market, less than a year after the final close of its first fund at $400 million. Brookfield Asset Management also had the final close of their Infrastructure Debt Fund in the beginning of the year at $1.1 billion.

5 Deal Values ($ Billions) Historical Private Equity - Buyout Investment in Canadian Companies: Deal Values Deal values reached $13.3 billion in the first quarter, the best quarter since Q and the strongest first quarter on record. $35.0 $30.0 $31.1 $25.0 $24.2 $28.2 $20.0 $15.0 $15.9 $17.7 $10.0 $10.9 $12.8 $11.8 $10.5 $13.3 $5.0 $0.0 $ Q1 Q2 Q3 Q4

6 # of Deals Historical Private Equity - Buyout Investment in Canadian Companies: Deal Volumes Despite historical total deal values, only 81 deals were announced or completed in the first quarter, down 15% from Q Q1 Q2 Q3 Q4

7 % of Deals PE-Buyout Dealmaking: Deals by Company Location Québec-based companies saw 38.3% of deals in the first quarter of 2018, up 4.4% from their 2017 share. British Columbia saw 13.6% of deals during the quarter, its highest share since % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q 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 43% of all deals during Q1, indicating firms increasing commitment to building off of their existing platform companies and performing industry consolidation. Mezzanine deals had a 16% share, up from 7% during the previous year. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q 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-led investments bounced back to 73% during the first quarter of 2018, up from 69% over the course of the entirety of 2017, the lowest percentage since % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q Canada United States Other Regions

10 # of Deals PE-Buyout Dealmaking Versus All M&A of Canadian Targets The number of Canadian M&A deals in the first quarter of 2018 dropped to 597, down 19% from Q The PE share of these deals increased from 12.9% to 13.6% over the same period % % % 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 Q1'18 # of PE Deals PE Deals as % of all M&A Activity 0%

11 Top Canadian Private Equity Deals, Q Portfolio Company Investors Rank Company Name Deal Value ($ Millions) Location Sector Investing Firms (Disclosed) 1 2 Husky Injection Molding Systems Pure Industrial Real Estate Trust $4,959.6 Bolton, ON Plastics Manufacturing Platinum Equity $3,800.0 Vancouver, BC Industrial Properties REIT Blackstone Group 3 Wolf Midstream $1,610.0 Calgary, AB Energy Infrastructure Canada Pension Plan Investment Board 4 Innergex Renewable Energy $1,100.0 Longueuil, QC Renewable Energy Caisse de dépôt et placement du Québec 5 Lundin Gold $513.6 Vancouver, BC Gold Mining 6 Napec $ Boralex $200.0 Drummondville, QC Kingsey Falls, QC Energy Infrastructure Renewable Energy Orion Resource Partners, Newcrest Mining Limited, Lorito Holdings, Zebra Holdings and Investments Oaktree Capital Management Caisse de dépôt et placement du Québec, Fonds de solidarité FTQ 8 Great Canadian Gaming $170.0 Coquitlam, BC Hospitality Brookfield Asset Management 9 Nevada Copper Corporation $128.2 Vancouver, BC Copper Mining Castlelake, Pala Investments 10 Immo 1ère Retirement Homes $121.6 Montréal, QC Residential Properties Desjardins Capital

12 Canadian PE-Buyout Investment by Deal Size Range Mega-deals drove investment in the first three months of the year, with the top four responsible for 86% of overall disclosed deal values. $514 $64 $940 $288 >= $1 Billion $500 - $999 Million 11 $13.3 Billion Invested $100 - $499 Million $10 - $99 Million Deals $11,470 < $10 Million Deal Values Undisclosed 17

13 Canadian PE-Buyout Investment by Sector, Previous Two Quarters Companies within the business service sector made up 26% of all deals during the first quarter of 2018 and 34% of all deal values. Manufacturing companies were responsible for another 38% of overall deal values. 40 Q Q Total # of Deals $6,000 Q Q Total Deal Values ($ Millions) $5, $4, $3, $2, $1,000 0 $0 Business Services Consumer Related Manufacturing Software Healthcare & Life Sciences Energy & Environmental IT & Media Mining Oil & Gas Forestry & Agriculture Transportation Finance

14 Deal Values ($ Billions) # of Deals PE Investments by Canadian Firms in non-canadian Companies Canadian firms participated in 25 deals with non-canadian companies in Q1 2018, with deal values of $48.3 billion boosted by the Blackstone-led acquisition of Thomson Reuters Financial & Risk business unit valued at $21 billion. $60 $50 $ $30 $20 $ $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 Q1'18 0 Total Deal Values, Canadian & Non-Canadian Investors # of Deals

15 Top PE Investments by Canadian Firms in Non-Canadian Companies, Previous Two Quarters Rank 1 Portfolio Company Company Name Thomson Reuters Financial & Risk Business Unit Deal Value ($ Billions) Investors Location Sector Investing Firms (Disclosed) $21.0 New York, NY Financial Data Canada Pension Plan Investment Board, Blackstone Group, GIC Special Investments 2 GGP Inc. $11.9 Chicago, IL Real Estate Brookfield Asset Management 3 Calpine Corp. $7.2 Houston, TX Power Generation 4 Equis Pte Ltd. $6.4 Singapore Investment Firm 5 Westinghouse Electric Company Canada Pension Plan Investment Board, Energy Capital Partners LLC PSP Investments, China Investment Corp, Global Infrastructure Holdings $5.7 Cranberry Township, PA Nuclear Energy Brookfield Asset Management 6 Refresco Group NV $2.1 Rotterdam, NL Soft Drinks 7 Cleco Corporate Holdings LLC $1.3 Pineville, LA Electric Utilities British Columbia Investment Management Corporation, PAI Partners SAS British Columbia Investment Management Corporation, Macquarie Infrastructure Partners 8 BGL Group $1.1 Peterborough, UK Insurance Canada Pension Plan Investment Board 9 SCI Packaging $1.1 Santa Monica, CA Packaging PSP Investments, Ontario Teachers Pension Plan, Canyon Capital Advisors, Arcadia Investment Partners 10 TerraForm Global $1.0 Bethesda, MD Renewable Power Brookfield Asset Management

16 PE-Buyout Fundraising by Canadian Firms Buyout fundraising was off to a slow start in 2018, with only 2 funds raising $2 billion during the first three months of the year. $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 $3.8 $ Q1 2018

17 # of Exits Canadian PE-Backed Exits, Previous Two Quarters 11 exits were completed in the first quarter of 2018, down 42% from the previous year and the lowest Q1 since 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 Atrium Innovations $2,914 Westmount, QC Nutritional Products 3 Napec $396 Drummondville, QC Energy & Infrastructure Permira Advisers LLP, Caisse de dépôt et placement du Québec, Fonds de solidarité FTQ Business Development Bank of Canada, Caisse de dépôt et placement du Québec, Fondaction, Fonds de Solidarité FTQ, Investissement Québec 4 JDS Silver $304 Vancouver, BC Mining Denham Capital 5 Neo Performance Materials $220 Toronto, ON Advanced Materials Oaktree Capital Management 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 Q1'18 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% United States 14% 13.5% 12% 12% 10% 10% 8% 8% 6% 5.5% 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 preliminary data mode Q Preliminary sample as of 12/31/2017 is approximately 64% updated. 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 Tuesday, April 24th, 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: