CANADIAN PRIVATE EQUITY BUYOUT REVIEW

REUTERS / Mark Blinch CANADIAN PRIVATE EQUITY BUYOUT REVIEW First Quarter 2016 Table of Contents Canada’s PE Buyout Market in Q1 2016 $ Invested an...
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REUTERS / Mark Blinch

CANADIAN PRIVATE EQUITY BUYOUT REVIEW First Quarter 2016

Table of Contents Canada’s PE Buyout Market in Q1 2016 $ Invested and # Companies Financed Top Buyout Deals Canada by Market Segment Canada by Sector & Province Canadian Investments Abroad Buyout Funds Raised Public and M&A Exits Explanatory Notes & Contacts

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Overview of Canadian PE Buyout Market Activity in Q1 2016 Canadian buyout-PE market trends Deal-making activity in Canada’s buyout and related private equity (PE) market showed a marked decline in the first quarter of 2016. Disclosed values of transactions (announced and completed) totaled $4.7 billion as of March 31st, down 22% in dollar terms from the year prior. A total of 59 deals were done in the first three months, the fewest deals in a first quarter since 2010. Top deals included CDP Capital’s $2.0 billion investment in Bombardier Transportation, Highbridge Principal Strategies & Hawthorn Equity Partners’ investment in GFL Environmental, and NRDC Equity Partners investment in Hudson’s Bay Company for its acquisition of luxury retailer Gilt Groupe Holdings. At the end of March, the two largest transactions sized $500 million or greater captured 61% of all disclosed disbursements made in the Canadian market. Deals sized between $100 million and $500 million took the second largest share of the total, or 25%, while deals sized less than $100 million accounted for the balance. Canadian market trends by sector Canadian manufacturing companies accounted for the largest share of buyout-PE deal-making last quarter with 9 transactions in Q1, or 15% of the national total. Consumer-Related and business services companies both followed a close second with 7 deals apiece, with mining and healthcare & life sciences companies both came in third place with 6 deals in each sector. When measured by disclosed deal values, manufacturing and energy & environmental companies dominated the largest transactions with $2.2 billion and $817 million respectively. IT & media and consumer-related companies followed closely behind with $463 million and $457 million respectively.

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Overview of Canadian PE Buyout Market Activity in Q1 2016 Canadian market trends by region The majority of buyout-PE transactions (announced and completed) in the Canadian market in Q1 2016 involved businesses that were located in Québec (42%) and Ontario (31%). However, only the province of British Columbia demonstrated any growth over Q1 2015, with 5 deals in Q1, a 66% increase. The number of deals done declined substantially in Québec (47%), Alberta (64%), and Ontario (45%). Though the number of deals done in Québec declined in the first quarter, the province attracted the bulk of the largest deals, securing $2.3 billion. Ontario-based companies attracted the second largest share, with $1.6 billion. Though British Columbia saw growth in its number of deals, half had undisclosed values this quarter, leaving the province with only $124 million of disclosed disbursements. Canadian investor activity in global markets Canadian buyout and related PE funds were substantially less active in international transactions in the first quarter relative to the year before. As of March 31st, Canadian funds led or participated in a total of 20 deals in other countries, and these were valued at approximately $17 billion. This compares against a total of 36 deals valued at $30.5 billion reported in the first quarter of 2015. Topping the list was San Diego-based Petco, which was acquired in a $6.3 billion LBO by CPPIB and CVC Capital Partners. Trends in Canadian buyout-PE fund-raising The fundraising activities of Canadian buyout funds maintained very strong levels in the first quarter of 2016 with a total of $14.3 billion of new capital committed, already exceeding the $11.1 billion raised in all of 2015.

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Buyout – PE Deal Values in Q1 Reach $4.7 Billion Down 22% From Q1 2015 $35 $31.0

Deal Value (CAD Billions)

$30 $25 $22.5

$20 $15 $12.0

$11.7

$10.5

$10 $4.7

$5 $0 2011

2012

2013

Q1

Q2 5

2014 Q3

2015

2016

Q4

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Buyout - PE Deal Volumes Down 43% From Q1 2015 Fewest Deals in a Q1 Since 2010 500 429

450

412

Number of Deals

400 350

300

333

341

303

250 200

150 100

59

50 0 2011

2012

2013

2014

Q1

Q2

Q3

6

2015

2016

Q4

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Slowdown in PE Dealmaking More Pronounced Than in Conventional M&A in Canada 450

429

35%

412

400

30%

333

Number of PE Deals

350

341

303

25%

300 250

20%

200

15%

150 10%

100

59

50 0

5% 0%

2011

2012

2013

Number of PE Deals

7

2014

2015

Q1 2016

% of M&A Activity

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Canadian Investors Lead 72% of Deals in Q1 2016 Up From 70% In 2015 500 429

450

412

Number of Deals

400 333

350

300

341

303

250 200

150 100

59

50 0 2011

2012

2013

Foreign Lead Investor 8

2014

2015

Q1 2016

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Top Canadian PE Buyout Deals First Quarter 2016 Province

Value (CAD $ Millions)

Disclosed Investors

Bombardier Transportation

QC

$2,089

CDP Capital

GFL Environmental

ON

$800

Highbridge Principal Strategies, Hawthorn Equity Partners

Hudson's Bay Trading Company

ON

$349

NRDC Equity Partners

Axia NetMedia

AB

$269

Partners Group

Physiotherapy, Rehabilitation and Medical Assessments segment

ON

$250

Audax Private Equity

Ceridian Canada

ON

$194

Thomas H. Lee Partners, Fidelity National Financial Ventures Group

Premium Brands

BC

$75

Pender West Capital Partners

Company

Centric Health Corp

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Top Two Buyout-PE Transactions Take 61% of Dollars # of Deals Done

Dollars Invested (Disclosed)

> $1 Billion

1

$2,089 Million (44%)

$500 Million - $1 Billion

1

$800 Million (17%)

$100 Million - $500 Million

5

$1,169 Million (25%)

$10 Million - $100 Million

13

$517 Million (11%)

< $10 Million

19

$89 Million (2%)

Deal Values Undisclosed

20

$0 (0%)

Deal Size Range

Total Deals With Disclosed Values: 39 (of 59) Total Invested: $4.7 Billion

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Manufacturing & Consumer Companies Lead in Q1 2016 With 15% & 12% of Deals Total Deals: 59 Manufacturing Consumer Related Business Services Mining Healthcare & Life Sciences Oil & Gas Transportation Software Finance Energy & Environmental IT & Media Construction & Engineering 0

1

2

3

11

4

5

6

7

8

9

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Manufacturing, Energy & Environmental Investments Drive Deal Values in 2015 Total Deal Values: $4.7 Billion Manufacturing Energy & Environmental IT & Media Consumer Related Oil & Gas Healthcare & Life Sciences Mining Business Services Finance Transportation Construction & Engineering Software $0.0

$0.5

$1.0

12

$1.5

$2.0

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$2.5

Sharp Declines in Deal Volumes Across All Regions but British Columbia 50 45

# of Deals

40

35 30 25 20 15 10 5 0 British Columbia

Alberta

Ontario

Q1 2015

13

Quebec

Rest of Canada

Q1 2016

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Canadian PE Investment Strong Beyond Canada Deal Volumes Down 44% From Q1 2015 150

$41.2

125

$40

$34.3

$35

100

$30.5 $30 $25

75

$20

$17.0 50

$15

$10.3 $10

25

$5.3 $5

$2.2

$1.4

$0

0

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

Q2'15

Total Deal Values, Including All Investors

14

Q3'15

Q4'15

Q1'16

# of Deals

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Canadian Investors, Non-Canadian Companies

$44.5

$45

# of Deals

Amount Invested (CAD $ Billions)

$50

Canadian Funds’ Investments Abroad Top Deals: First Quarter 2016 Rank

Company Name

Deal Value

Location

Industry

Canadian Investors (Disclosed)

(C$ Bil)

San Diego, CA

$6.3

Consmer Related

CPPIB

New York, NY

$3.8

Real Estate

Brookfield Asset Management

Isagen SA ESP

Columbia

$2.8

Electric Utilities

Brookfield Asset Management

University House Communities Group

Dallas, TX

$2.0

Real Estate

CPPIB

1

Petco

2

Rouse Properties

3

4

15

Canadian PE Exits Doubled From Q1 2015 Trade Sales Comprise 77% of Exits 25

# of Exit Events

20

15

10

5

0

Q1'14

Q2'14 IPO

Q3'14

Q4'14

Q1'15

Financial Sale 16

Q2'15

Q3'15

Q4'15

Q1'16

Trade Sale

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Canadian Buyout-PE Fundraising Sees Excellent Start to 2016 Funds Raised (Billions of $ CAD)

$18.0

$16.1 $16.0

$14.7

$14.3

$14.0 $12.0

$12.2 $11.1

$10.0 $8.0 $6.0 $4.0

$2.0 $0.0

2012

2013

2014 17

2015

Q1 2016

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Explanatory Notes 1.

Data collected and analyzed by Thomson Reuters for this statistical report were drawn from a variety of sources. These include Thomson Reuters M&A databases, regulatory filings, and public and proprietary sources among the members of Réseau du capital d’investissement du Québec and other Canadian and non-resident fund managers responding to Thomson Reuters’ quarterly surveys.

2.

All current and previous years data is as of Monday, April 25th, 2016. Data is continuously updated and is therefore subject to change.

3.

All figures are in Canadian dollars unless otherwise noted.

4.

Key statistical indicators (e.g., total disbursements, per quarter or per annum) are influenced by the fact that a substantial fraction of buyout and other PE deals are not fully disclosed. For instance, “dollars invested” in a given period pertain only to those deals with values that have been published or confidentially disclosed to Thomson Reuters.

5.

The data also highlight the deal-making of Canadian funds in non-Canadian companies. “Dollars invested” pertain to the total value of disclosed deals in which Canadian funds have participated and not the specific Canadian financial contributions to these deals.

6.

Statistical data reflect all essential forms of buyout-PE deal-making, including control-stake acquisitions of businesses, minority equity investments, restructuring and special-situations transactions, mezzanine deals over $3 million, and other quasi-equity investments.

7.

For further information on Thomson Reuters venture capital and private equity offerings, please visit us at: http://thomsonreuters.com/financial/venture-capital-and-private-equity/

8.

For further reports on private equity, venture capital, and other asset classes, please visit us at:

http://dmi.thomsonreuters.com/DealsIntelligence/QuarterlyReviews 9.

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