It was a strong first quarter for Canadian venture capital (VC) investments, but private equity (PE) deals were sluggish, according to new data from the Canadian Venture Capital and Private Equity Association (CVCA).
The quarter saw $1 billion in Canadian VC investment across 142 deals — a 48% increase from Q1 2018. The average deal size was $7.4 million, up 56% from Q1 2018, and 34% higher than the average deal size over the past five years.
“Mega deals” (worth $50 million or more) accounted for 57% of dollars invested. The largest was Toronto-based Vena Solutions Canada Incorporated’s $115 million growth equity financing round from U.S. investors, followed by $90 million and $76 million financing rounds for Squamish, B.C.-based Carbon Engineering Limited and Montreal-based Enerkem, respectively.
The information and communication technologies (ICT) sector received the highest share of investment dollars (59%), followed by the cleantech (19%) and life science (14%) sectors.
Ontario received the largest share of VC investment (46%), followed by Quebec (19%) and British Columbia (17%). The cities that received the largest share of investment dollars were Toronto (40%), Calgary (15%) and Montreal (14%).
Meanwhile, the CVCA reported that high valuations continued to hurt PE investment, with $1.9 billion invested over 130 deals — representing a 72% dip compared to Q1 2018. There were only nine M&A exits in the quarter, totalling $270 million.
The $199 million acquisition of B.C.-based Prepac Holdings Inc. by Torquest Partners with financing support from Export Development Canada was the largest disclosed deal of the quarter, followed by Goodlife Fitness Centres Inc.’s $100 million debt financing from Penfund Inc.
Forty percent of PE deals were debt financings with an average size of $11.8 million.
Almost half of the PE dollars invested were in the ICT sector ($929 million), while the industrial and manufacturing sector and the consumer and retail sector received $562 million combined.
“While the first quarter was slow, we anticipate that private equity activity will rebound in subsequent quarters,” CVCA CEO Kim Furlong said in a release.