Canadian venture capital (VC) investment is on pace for another strong year, while the private equity (PE) market lags behind last year’s total deal value for the same period despite an explosive rebound in 2015 Q3. These are some of the main findings from the Canadian Venture Capital & Private Equity Association’s (CVCA) private capital market activity reports for the first nine months of 2015.
VC investment was strong over the first nine months of 2015 with 410 completed deals, capturing $1.6 billion – a 31% increase in deal volume, and 15% increase in disbursements over the same period last year.
While information and communications technology continues to be the driving force of overall VC investment, capturing 58% of total disbursements for the first nine months of 2015, the life sciences sector is playing an increasingly important role. Life science disbursement volume surged by almost 70%, from Q2 ($303 million) to Q3 ($511 million) and represents 31% of total disbursements for the first nine months of 2015 (compared to 23% of total disbursements in 2014).
Other insights from the report reveal that VC fund raising in 2015 has already surpassed last year’s total (2015 = $1.3 billion vs. 2014 = $1.2 billion), and there’s a trend toward early-stage investing which has captured the majority (52%) of investments at $843 million to date. Early-stage investing captured 33% of total investments in 2013 and 40% in 2014.
While PE activity roared back to life in Q3 with an explosive 355% growth in deal value from Q3 to Q2, overall deal value lags totals from the same period last year. PE deal value in 2015 Q3 jumped to $8.4 billion after a very slow Q2 which generated less than a quarter of that amount ($1.8 billion). To date there have been 260 deals in 2015, worth $16.3 billion in deal value compared to 228 deals and $19.2 billion for the same period last year. The oil, gas and energy sector remains the driving force over the first nine months of 2015 with 30 deals worth $8.2 billion (12% of volume and 50% of the total deal value).
In terms of deal types, Growth is down approximately 75% from totals in 2014, while the decline in Add-ons (down 90% in share) is attributable to one large deal (i.e. the $11.8 billion Tim Hortons deal) in 2014. However, Infrastructure is up 93% from totals in 2014.
“We’re seeing a sustained uptick in venture capital that shows this is now a $2 billion plus and growing business in Canada, which is a significant milestone for this industry,” said Mike Woollatt, CEO, CVCA. “While we didn’t expect a repeat of 2014 in private equity given last year’s record-setting pace, 2015 is still going to be a banner year in terms of private equity investments.”