TORONTO, May 28 /CNW/ - 2008 marked a turning point for the PE industry,
globally and in Canada. The worldwide financial crisis hit the industry
particularly hard across almost all dimensions - fundraising, investments,
exits, and returns - reversing many of the trends of the past 5 years and
setting in motion a series of structural changes that will lead to a
fundamental reconfiguration of the industry.
According to a McKinsey & Company Canada annual report released today,
the crisis has had a devastating impact on many LPs around the world, creating
vulnerabilities in the investor base of many GPs. As a result, some GPs are
searching for untapped opportunities in new LP segments - such as sovereign
wealth funds or smaller pensions and endowments - and are developing new
strategies to access these and other attractive opportunities, expanding into
new markets, new investments and targets, and new asset classes.
Furthermore, the shifting balance of power between LPs and GPs is likely
to lead to longer-term changes in the terms and conditions governing their
relationships, as well as GPs developing more tailored approaches to serve the
LPs' varying levels of sophistication and their fast-changing needs.
The challenges the industry faces are daunting and making the changes
required to overcome them will not be easy. Yet the opportunities have never
been greater, says Private Equity Canada 2008: The industry at an inflection
This report consists of two sections:
- Part 1 draws on McKinsey's extensive experience in serving PE market
participants. It examines the industry in 2008, analyzes the cyclical
and structural forces affecting it, provides a perspective on the
short- and long-term implications for its players, and identifies
actions they could take to outperform in these difficult times.
- Part 2, prepared by Thomson Reuters for McKinsey, offers an in-depth
review of Canada's PE market over the past year. It describes key 2008
trends in the buyout, mezzanine, venture capital, and other PE
segments and compares market growth rates, the creation of new
partnerships, and domestic and global investor activity to prior
years. It also includes the results of interviews with a number of
Canada's leading PE professionals that provide important insights into
the quantitative data.
Additional highlights include:
- Capital managed by Canadian PE funds in 2008 was estimated to be $84.7
billion, as compared to $79.5 billion in 2007.
- Based on survey findings, buyout and other PE funds captured most of
the new dollars, managing $58.4 billion in 2008, up 23 percent from
the year before. This segment's share of the overall market was a
record 72 percent.
- Foreign LPs were the leading source of funds flowing into Canada's
buyout and mezzanine segments, accounting for $3.2 billion in new
commitments, up from $606 million in 2007.
- Canadian buyout and other PE fund managers disbursed a total of
$6.7 billion to 562 deals, down 57 percent from 2007.
- Venture capital activity dropped 21 percent in 2008, with fund
managers disbursing $1.2 billion to 473 deals.
- Global buyout acquisitions were down 70 percent from 2007 to 2008.
- Canadian 10-year net returns were 16 percent for buyouts, which is
more than twice as high as those in the United States; however,
returns for venture capital were -3 percent, compared to 17 percent in
the United States.
The report's conclusions are drawn from McKinsey's proprietary research
and the data Thomson Reuters collected and analyzed from its annual
proprietary survey and supplemented with several related surveys and
interviews. The 2008 survey was consistent with the 2007 one - and those of
previous years - permitting year-over-year comparisons. The well over 100
survey respondents represented Canada's largest PE firms and 96 percent of the
entire capital pool.
About McKinsey & Company
McKinsey & Company is a management consulting firm that helps the world's
leading corporations and organizations address their strategic opportunities
and challenges. For over 80 years, the firm's primary objective has been to
serve as an organization's most trusted external advisor on critical issues
facing senior management.
About Thomson Reuters
Thomson Reuters is the authoritative source of information on activity in
Canada's private equity space. Its extensive network of contacts and its
proprietary data sources have made the firm a focal point for information on
Canadian private equity deals and dealmakers. For this reason, Thomson Reuters
is a vital, value-adding resource for understanding the full universe of
market players in Canada, as well as those based in the United States and
other countries that are engaged in cross-border investing.
For further information:
For further information: To obtain a copy of Private Equity Canada 2008,
visit http://www.mckinsey.com/clientservice/privateequity/ or
www.thomsonreuters.com. To request an interview, contact Sacha Ghai at (416)
313-3834 or firstname.lastname@example.org; Jonathan Tétrault at (514) 939-6925 or
email@example.com; George Georghiades at (416) 313-3883 or
firstname.lastname@example.org; or Kirk Falconer at (613) 747-4441 or