Canada's Buyout-Private Equity & Venture Capital Markets in Q1 2013: Venture Capital Investment Up 55%, Buyout Deal Activity

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
        'new' investments
    --  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
        Canadian funds

VENTURE CAPITAL

Investing Highlights

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.

Exit Highlights

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.

Fund-raising Highlights

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

Investing Highlights

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

Exit Highlights

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,"

Fund-raising Highlights

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.

Thomson Reuters

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www.thomsonreuters.com .

CVCA

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 
Marketing,llinton@cvca.ca .

SOURCE: CVCA - Canada's Venture Capital & Private Equity Association

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CO: CVCA - Canada's Venture Capital & Private Equity Association
ST: Ontario
NI: FIN ECO 

-0- May/16/2013 08:00 GMT