Private Equity Canada 2010 - Preparing for the next wave of growth

TORONTO, May 26, 2011 /CNW/ - What a difference a year makes. In 2009, the PE industry seemed to have hit bottom. In 2010, the worst seemed to be over, and now the story is all about recovery and revival.

Although fundraising has remained challenging, private equity is on the rise. Buyout deal volume is increasing. LPs are indicating a strong desire to recommit or up their commitments to the asset class. Blackstone shares have recovered significantly from their lows, and Apollo undertook an IPO of its business in March 2011 to successfully raise $565 million.

According to the 10th annual PE report just released by McKinsey & Company, what makes this rebound different from those of the past is how LPs are thinking about and adapting their approach to private equity as an asset class - and how GPs will need to adapt accordingly. McKinsey thinks three trends will shape the LP-GP relationship, and thus the market:

  • The unprecedented amounts of capital flowing into the PE and other alternative asset classes
  • The decline of performance persistence, which is resulting in LPs developing more robust GP selection and management processes and building organizations to support them
  • A clearer bifurcation in GP strategies and approaches to working with LPs.

Private Equity Canada 2010 examines each of these trends, identifying the implications for LPs and GPs and highlighting the elements that they are likely to incorporate into their strategies.

The report also provides an in-depth review of Canada's PE market over the past year. Prepared by Thomson Reuters for McKinsey, it describes key trends in the different PE segments and compares market growth rates, the creation of new partnerships, and domestic and global deal activity to prior years.

Additional Private Equity Canada 2010 highlights include:

  • In 2010, Canadian PE deal-making increased across the spectrum for the first time in 3 years. Investment levels in the Canadian market grew moderately year over year, while Canadian PE funds had unprecedented influence in shaping market trends on a global basis.
  • Capital managed by Canadian PE funds totaled $84.9 billion in 2010, up 12 percent from 2009.
  • Buyout and related PE funds absorbed most new dollars in 2010. Canadian fund managers oversaw $63.4 billion, up 18 percent from 2009, accounting for 75 percent of the entire market.
  • Mezzanine and other quasi-equity fund managers oversaw $6.6 billion, down from 2009, and comprising 8 percent of the aggregate amount.
  • Venture capital fund managers oversaw $14.9 billion, almost unchanged from 2009, and making up 17 percent of the overall pool.
  • Disbursements by Canadian buyout, mezzanine, and other PE funds totaled $7.4 billion, up 120 percent from 2009. In addition, deals done in domestic and foreign businesses totaled 369, up 18 percent over the same period.
  • Canadian VC funds invested approximately $1 billion in domestic and foreign businesses, up 16 percent from 2009. Company financings also increased 11 percent year over year, totaling 454.

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 2010 survey was consistent with the 2009 one - and those of previous years - permitting year-over-year comparisons. The 123 survey respondents represented all of the largest investor groups based in Canada and 97 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 market. 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 deal-makers. 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.

SOURCE McKinsey

For further information:

To obtain a copy of Private Equity Canada 2010, visit www.mckinsey.com/privateequitycanada or www.thomsonreuters.com, or www.canadavc.com. To request an interview, contact: Robert Palter at 416 313 3774 or robert_palter@mckinsey.com; Sacha Ghai at 416 313 3834 or sacha_ghai@mckinsey.com; Jonathan Tétrault at 514 939 6925 or jonathan_tetrault@mckinsey.com; or Kirk Falconer at 613 747 4441 or kirk.falconer@thomsonreuters.com.

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