Private equity and venture capital continued their strong growth in Q1, according to Canada’s Venture Capital Association (CVCA).
The amount of private equity invested in the first quarter of 2014 doubled year over year. The number of deals in Q1 was slightly higher year over year as well, totaling 77, up 3% from Q1 2013.
Read: Primer on private equity
The growth in the amount invested resulted from a number of major transactions. These included two previously-announced $1 billion-plus deals (representing 56% of all disbursements) — the acquisitions of Patheon Inc. and Atrium Innovations Inc.
While this led to health and life sciences representing the majority of amounts invested, actual deal activity was led by oil and gas (13 deals), manufacturing (12 deals) and IT (9 deals). These three sectors represented a combined 44% of the total number of deals.
Domestic private equity investors continue to account for the majority of activity, representing 76% of the total deals in Canada in Q1. Canadian funds were also generally more active in global deal-making. Canadian funds led or participated in a total of 19 transactions abroad, with these reflecting values of approximately $3.1 billion in Q1 2014, versus $2.1 billion in Q1 2013.
Following record-breaking fund raising results in 2013, Canadian private equity sustained high levels of market activity into the first quarter of 2014. New capital committed totaled $3.5 billion in Q1 2014, which is more than triple the $1.1 billion committed to funds at the same time in 2013.
The amount of venture capital invested in Q1 2014 totaled $378 million, spread over 122 deals. This represented a moderate 2% year-over-year growth in the amount invested; however, the number of deals was up 16% over Q1 2013.
The first three months of the year saw several major financings, including those backing Edmonton-based Aurinia Pharmaceuticals, Vancouver-based BuildDirect, and Dorval, Québec -based Clementia Pharmaceuticals.
The average deal size in Q1 was relatively small. Both Canadian investors ($1.4 million average deal size) and U.S. investors ($3.9 million average deal size) showed a significant decrease in average deal size from 2013. Only life sciences saw an increase, while information technology, clean tech and traditional sectors all declined.
In terms of investment rounds, Series A continues to receive the lion’s share of venture capital investment, representing 37% of 122 deals in Q1. The first quarter also saw more investment from outside Canada and the U.S., with an increased share of global venture capital investment into Canada.
Information technology and life sciences saw the biggest growth in investments and drove venture capital investment in Q1, representing a combined 87% of total invested. Within life sciences, human biotech is dominating the activity, representing nearly 90% of life science investment in Q1. This reflects a similar trend to that seen in the U.S. and elsewhere.