Private Equity Trends: U.S. firms looking North to Canada

By Generational Equity

09/05/2016

More often than not trends in M&A are consistent throughout the whole of North America. However, PitchBook has released research into specific trends impacting Private Equity activity in Canada that makes for interesting reading. Their analysis states:

“The current Canadian private investment scene is shaped by a few key, relatively singular drivers. Proximity to the U.S., as well as key tax provisions, clearly play a considerable role in the flow of private equity and venture capital financing alike, with more and more U.S. firms migrating north in search of investment opportunities over the past few years.”

It is that final sentence that is the key consideration. According to a number of analysts U.S.-based firms are increasingly looking north of the U.S. border for opportunities. This is due to a number of factors. Not only does Canada offer security and economic safety, it is also geographically close to the U.S., which allows equity firms to visit their holdings with relative ease.

The good news for business owners in Canada is that the equity firms that operate here are attracted to middle-market and lower middle-market companies. PitchBook states:

“The majority of Canadian transactions occur in the sub-C$25 million size bucket, and thus, the noticeable jump in add-on deals comes as no surprise as firms expand existing portfolio companies and protect future exit values—this notion has been playing out in the global PE landscape for quite some time now.”

This assertion is illustrated in the following chart based on PitchBook’s data:

In our exit planning seminars, we emphasize that bolt-on activity is at an all-time high right now, particularly here in Canada. Which is more good news for if you are the owner of a privately held company. It’s important to note that the above data is only reflective of publicized transactions. Most transactions, especially smaller ones, fly under the radar and are therefore not counted in data like this.

If you own a company and are considering eventually exiting your business, or finding an investor and being retained as a partner, it would be beneficial to attend one of the exit planning seminars that Generational Equity holds throughout the country.

To find out more about planning your exit strategy, you can attend one of our complimentary workshops.