LEXPERT MAGAZINE
|
SEPTEMBER
/
OCTOBER 2018 37
| PRIVATE EQUITY |
sector." She attributes that to Montreal's
growing reputation as "one of the capitals
for AI, so that's why we see a lot of invest-
ment and activities in that sector."
at reputation helped lure Facebook
to open a research lab in Montreal in Sep-
tember 2017, becoming another of numer-
ous technology companies setting up in
that city. As Eric Lalanne, president of De
Grandpré Chait LLP, put it, AI in Mon-
treal feels like a "gold rush."
Of particular note in the Blakes study
was that only 8% of its transactions took
place in the Oil & Gas sector. "In the recent
past, we would have categorized the public
market as being very energy Oil & Gas fo-
cused," says Sarno. "What Private Equity is
focused on versus what our public markets
represent is interesting."
e Acuris study commissioned by
Bennett Jones found that 14% of its re-
spondents named Oil & Gas as one of the
four key industries they would prioritize in
the coming 12 months. Consumer goods
(24%), industrials and chemicals (22%)
and technology (14%) were the other three.
"ese responses should come as little sur-
prise, given that these four sectors have had
the greatest reported deal value in Canada
from Private Equity buyouts and buy &
build transactions over the last five years,"
the study concluded.
Concerning Oil & Gas, it noted: "e
sector is emerging from an undeniably
tough period. Foreign direct investment
in Canadian Oil & Gas fell 12.2% in 2017
— the steepest drop in nearly two decades.
In addition to the global slump in oil prices
that struck in 2014, Canada is dealing with
a deficit of pipeline capacity that forces pro-
ducers to seek other, more expensive means
of transport. But with oil prices up, some
respondents believe this is the moment to
seek opportunities ..."
Transactions in the Oil & Gas sector
do still take place, says Mercury, and when
they do, they tend to be big. He points, as
an example, to the announcement in early
July that Enbridge Inc. sold its Canadian
natural gas gathering and processing busi-
ness to a group led by Brookfield Asset
Management Inc. for $4.31 billion.
While the low numbers for Oil & Gas
deals were unexpected, Blakes was not
surprised that its study revealed growing
popularity of representation and warran-
ty insurance.
"is is obviously a very hot topic now,"
says Sarno, whose study devotes three pages
to data collected from "rep and warranty
brokers and carriers, who provided it and
referenced their contributions. We've seen
rep and warranty insurance used more and
more in the last 12 to 18 months and now
it is becoming almost a staple," especially
when there's an auction.
Michael Caruso, a partner in the Toron-
to office of Norton Rose Fulbright Canada
LLP, whose expertise includes M&A insur-
ance, says he has definitely seen a dramatic
rise in the use of R&W insurance.
"Our involvement goes back four or five
years when there were few insurers and the
product was really in its infancy," he says.
"Since that time, and particularly in the
last 18 to 24 months, [its] use has escalated
significantly. We've seen 200%, 300% an-
ANALYSTS'
FOUR INDUSTRIES
TO WATCH IN 2019*
PRIVATE EQUITY
DEALS, IN VALUE*
TRANSACTION
TYPES*
Consumer goods: 24%
Industrials and chemicals: 22%
Technology: 14%
Oil & Gas: 14%
*Acuris analysis for Bennett Jones
Founders selling
to PE: 47%
Strategic to PE: 26%
PE to strategic: 16%
*Blakes Canadian Private Equity Deal Study
$100 million or less: 48%
$100 million to
$500 million:
31%
$500 million plus: 20%
*Blakes Canadian Private Equity Deal Study
"My main message is that Canada
will remain an attractive jurisdiction
for US capital regardless of what
happens with NAFTA and US
Tax reform and all that."
JOHN MERCURY
BENNETT JONES LLP
