Canada's Buyout-Private Equity & Venture Capital Markets in Q1 2013: Venture
Capital Investment Up 55%, Buyout Deal Activity Moderates
TORONTO, May 16, 2013 /CNW/ - Based on data from the CVCA- Canadian Venture
Capital and Private Equity Association and research partner Thomson Reuters,
for the first quarter of 2013, Canadian venture capital and private equity
funds (buyout) disclosed $2.56 billion of new investments and $1.48 billion of
new capital formation. Sector highlights included the following:
Venture capital highlights:
-- An increase in both the number of investments and proportion of
-- A significant increase in total capital invested
-- A marked increase in clean tech financings
-- A significant number of exits for venture-backed companies,
with the majority of these via strategic sales
-- A decline in fundraising relative to the prior period, Q1 2012
Private equity (buyout) highlights:
-- Resource extraction captured one third (33%) of deals and the
majority of capital deployed
-- Liquidity for PE backed companies was consistent with prior
periods and driven primarily by strategic sales
-- There was a noticeable decline in international activity by
Venture capital investment activity in Canada increased 55% versus the same
period in 2012 to $460 million in the first quarter of 2013. This also
represented a marked increase over the previous quarter. The number of deals
also grew 17% with 137 Canadian companies receiving new investment capital.
The size of Canadian VC financings increased to an average of size of $3.4
million, up substantially from the $2.5 million average in Q1 2012. Despite
the increase, the average deal size was still only 49% of that seen for
comparable firms in the United States in Q1 2013.
"It is gratifying to see the substantial growth in venture capital investment
in Canada in the first quarter, particularly with respect to first time
investments and clean tech. This is likely, at least in part, a reflection
of the successful capital formation in 2011 and 2012 now resulting in the
managers of those funds being able to put more capital to work in outstanding
new and emerging companies," said Peter van der Velden, President of the CVCA
and Managing General Partner of Lumira Capital Corp.
On a sector basis, investment activity for the quarter was led by the clean
technology sector, which accounted for 39% or $180 million of all investments,
materially exceeding the $144 million invested during all of 2012. The
Information technology sector accounted for $150 million of the quarter's
investment activity (up 6% year over the prior year), while the life sciences
sector raised a disappointing $40 million, which was down from the prior year.
Domestic and foreign VC fund exits from Canadian-based portfolio businesses
got off to a strong start in 2013, with 15 liquidity/realization events, which
was well ahead of 2012, a year in which there were only 30 such liquidity
events for the entire year. Strategic sales accounted for the majority of
exits, although two venture back companies did complete initial public
offerings during the period.
"The considerable number of exits in the first months of 2013 is encouraging
and should have important spillover effects for the Canadian venture capital
market. Exits result in distributions back to limited partners and are
therefore essential in allowing for the continuity of the investment cycle,"
said Mr. van der Velden.
In contrast to investment activity, Canada VC fund-raising activity in the
first quarter of 2013 lagged activity of one year ago, when a significant
number of major partnerships were closed. New capital committed to a dozen
Canadian funds totaled $381 million in this period, down 44% from the same
time in 2012.
"These numbers, while not entirely unexpected given the strength of fund
raising activity in 2012, highlight the fragile nature of the Canadian venture
ecosystem. Of the capital committed to VC funds in the quarter, $178 million
came from retail investors, $100 million came from the managers of a single
fund (it was a self-fund entity) and $78 million came from foreign sources.
The numbers highlight the critical need for capital in the sector from a
variety of sources, the continuing importance of retail capital, and the need
to engage domestic and foreign institutional, financial and corporate
investors in the Canadian VC sector, something which the Venture Capital
Action Plan will hopefully start to address" said Peter van der Velden,
President of the CVCA and Managing General Partner of Lumira Capital.
BUYOUT & PRIVATE EQUITY
With total disclosed investments $2.1 billion for Q1, 2013 the level of
investment activity was in-line with amounts reported in Q1 2012. The key
change for the period was a 47% decline in the number of deals, which was
reflective of a handful of major transactions during the period.
"While the level of deal activity in Q1 was a bit disappointing, it is
important to note, it follows a record year for domestic deal transaction
activity in 2012." said Mr. van der Velden.
In terms of sector allocations, resource extraction captured one-third of
deals in the first three months of 2013, followed by construction-engineering
and information-media sectors, which each took 11% of the total number. In
terms of dollar flows, mining dominated in this period, accounting for 53% of
the total largely because of the Arcelor Mittal Mines Canada transaction.
The oil and gas sector followed with 20% of all disbursements.
During the first quarter Canadian buyout-PE funds were less active abroad, at
least as compared to their extensive deal-making throughout 2012 and 2011.
Despite the decline in activity, Canadian funds still led or participated in a
total of 13 international deals with disclosed values of $2.1 billion
The pace of liquidity/realization events involving Canadian-based, PE-backed
companies remained steady in Q1. Domestic and foreign fund realizations
totaled 19, or effectively one-quarter of the 78 exits reported in all of
2012. Strategic sales continued to dominate exit activity, accounting for 74%
of transactions in Q1 2013.
"As with venture-backed exits, the steady number of liquidity events involving
private equity investments in Canada is positive news," said Mr. van der
Velden. "This is especially so in light of concerns about a continuing "exit
bottleneck" that has the potential to negatively impact private equity
deal-making and fund-raising in parts of the global market,"
Canadian buyout, mezzanine and other PE fund-raising activity in Q1, 2013
mimicked activity in 2012, with a total of $1.1 billion of new capital being
committed to ten partnerships and other funds. During the whole of last year,
Canadian buyout-PE fund-raising brought $4.5 billion into the market.
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The CVCA - Canada's Venture Capital & Private Equity Association, was founded
in 1974 and is the association that represents Canada's venture capital and
private equity industry. Its over 2000 members are firms and organizations
which manage the majority of Canada's pools of capital designated to be
committed to venture capital and private equity investments. The CVCA
fosters professional development, networking, communication, research and
education within the venture capital and private equity sector and represents
the industry in public policy matters. www.cvca.ca
To arrange an interview with Peter van der Velden, President of the CVCA and
Managing General Partner of Lumira Capital Corp, or Richard Rémillard,
CVCA's Executive Director, please contact Lauren Linton, Director of
SOURCE: CVCA - Canada's Venture Capital & Private Equity Association
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-0- May/16/2013 08:00 GMT
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