Activity in Québec's buyout and private equity market reaches record levels in the first half of the year, while venture capital fundraising picks up in the second quarter

MONTREAL, Aug. 21, 2012 /CNW Telbec/ - Buyout and private equity (PE) transactions in Québec companies have reached their highest level since the 2007 peak in the last cycle, with a total of 57 transactions in the first half of 2012, more than two-thirds the number conducted in all of 2011. Fundraising activity in the venture capital (VC) market was especially vigorous in the second quarter of 2012, with new commitments totalling $683 million, up substantially from the $154 million committed in the same period in 2011. These observations are drawn from a report on the Québec buyout and PE market for the first half of 2012 and a report on activity in the VC industry for the second quarter of 2012, both compiled by Thomson Reuters and published today by Réseau Capital.

A fast-growing buyout and PE market
Buyouts and PE mainly involve control-stake acquisitions and minority-equity investments, to finance business growth or to help make acquisitions or achieve recovery, as well as mezzanine debt, or quasi-equity investment. The disclosed value of transactions in this market reached $2.7 billion in the first half of the year, more than double the stated amount for all of 2011 ($1.3 billion) in addition to exceeding activity in 2010, 2009 and 2008. The largest transaction recorded in the report is the $1 billion injected by the Caisse de dépôt et placement du Québec into CGI Group Inc.

"The buyout and PE market plays an essential, structure-enhancing role in the Québec economy by backing business expansion and acquisition projects in a range of economic circumstances and growth sectors," says Réseau Capital Co-President Geneviève Morin. "This type of transaction helps namely in providing greater impetus to large companies that aim to strengthen their global competitive positions."

Across Canada, the buyout and PE market was also robust, with 160 transactions totalling $7.6 billion in disclosed investments. Québec dominates the market, accounting for 36% of Canadian transactions and 36% of the dollars invested.

Manufacturing sectors drew the largest portion of transactions in Québec, with one-quarter of the total, followed by retail trade (17%) and business services (12%). In terms of outlays, information technologies came out on top with 37%, followed by financial services (23%) and the distribution and wholesale trade sector (12%).

The dominant type of transaction in Québec in the first half of the year was minority-equity investments, accounting for 54% of transactions and 61% of disclosed values, while control-stake acquisitions accounted for 18% of transactions, or 19% by value.

Venture capital: surge in fundraising, but investment remains low
VC fundraising maintained its first-quarter momentum, with another period of strong growth. New commitments more than quadrupled, reaching $683 million, compared to $154 million in Q2 2011. At June 30, new commitments to Canadian funds totalled $1.4 billion for the first half of 2012, more than triple the $460 million committed a year earlier. Québec-based funds played a key role in the increase in Canadian funds raised in the first half, accounting for $748 million, or 52% of the new commitments to date in 2012.

Despite a rise from the first quarter, investment activity remained weak, with transactions totalling $96 million, down 25% from the same period in 2011. Altogether, 49 companies received VC financing, a 23% decline from 2011. The North American market is showing mixed results: in Canada, investments rose by 17% to $438 million, while in the United States there was a 22% drop compared to the previous year.

"It is clear that this decline in the VC market remains a matter of concern, and we very much hope that all the efforts that have been applied successfully to fundraising will soon benefit developing companies seeking new capital to complete their innovative projects and support their growth," Ms. Morin adds. "In Québec, we have a healthy VC ecosystem, with many managers who have fresh funds at their disposal and high-quality companies. It is just a matter of time before investment levels recover."

VC activity in Québec accounted for a relatively small portion of Canadian activity in Q2 2012, with 22% of the dollars invested. Québec's share was 33% for 2011 as a whole. But Québec was ahead in the number of companies financed, with 36% of the Canadian total. IT sectors again came out on top, at $44 million, driven in particular by the period's largest transaction, the US$30-million financing of Montréal-based Lightspeed Retail Inc. Non-technology sectors experienced 66% growth compared to Q2 2011, with $39 million invested.

Local investors, led by labour-sponsored and other retail VC funds, maintained a strong presence, injecting $63 million, or two-thirds of the total invested, although this was down 24% from the same period in 2011. Foreign VC funds were also less active in the second quarter, investing $33 million in Québec transactions, a 25% decline.

About Réseau Capital
Réseau Capital, founded in 1989, is the only private-equity association that brings together all stakeholders involved in the Québec investment chain. The mission of Réseau Capital is to contribute to the development and efficient operation of the private-equity industry, which plays a major role in the development and financing of businesses in Québec. Réseau Capital has more than 425 members representing private-equity, tax-advantaged and public investment companies, as well as banks and insurance companies, accounting and law firms, angel investors, and many professionals working in the field.

SOURCE: Réseau Capital

Source:        

Réseau Capital
Geneviève Morin
Co-President
Head of Investment
Fondaction CSN

Shahir Guindi      
Co-President
Managing Partner
Osler, Hoskin & Harcourt LLP

Information: 

Josée Massicotte
514 388-0169
[email protected] 

Valérie Gonzalo
514 626-6976
[email protected]