16 LEXPERT MAGAZINE
|
MARCH 2019
going to be exit strategy.
In the past, probably the most common
way for Private Equity firms to exit was
through an Initial Public Offering. But
Canadian investors haven't had much ap-
petite for new issues.
A PwC study showed just 54 initial pub-
lic offerings last year totaling $2.2 billion on
all four major Canadian stock exchanges
— less than half of 2017, which was hardly
a stellar year either. e largest single IPO
was the $462 million raised by HR soware
firm Ceridian HCM Holding.
In the US, in contrast, a single of-
fering, for Alibaba Group Holding,
raised US$21.77 billion — more than 10
times all Canadian IPOs. US markets saw
191 IPOs in 2018 raising US$46.8 billion,
according to the Business Insider.
Susan Tomaine, a partner at Blake, Cas-
sels & Graydon LLP in Vancouver, says
Private Equity managers don't have high
expectations of being able to make an exit
through an IPO in Canada these days.
"With public markets being a barrier,
the challenge is to find another strategy,"
she says. And they have, she adds. "ey're
doing strategic partnerships, strategic dis-
positions and bolt-on acquisitions."
e thinking behind a bolt-on acquisi-
tion is that by buying a company that pro-
vides complementary services, technology
or geographic diversification to an existing
asset, the fund is creating a bigger, more ef-
ficient company with a higher valuation.
It's a play Private Equity lawyers say they've
done fairly oen recently, and one that's
seen as an effective exit strategy.
at said, Tomaine says some sectors
are unquestionably more attractive to PE
buyers than others. She points to tech and
says, for example, the University of British
Columbia's active support of technology
research has drawn a fair bit of Private Eq-
uity attention.
"ere are a lot of technology entrepre-
neurs here in Vancouver so we've seen and
expect to continue to see lots of PE interest
in anything tech — fintech, medtech, agri-
tech [agriculture technology]. ere are so
many opportunities and new and interest-
ing stories developing."
In Western Canada, she says, you also
have to look at the resource sector: In BC,
mining in particular. She acknowledges in-
terest in that area isn't great at the moment.
"It's a tough market to raise funds right
now and I'm not saying we're going to see a
lot of new Private Equity coming into min-
ing, but there are Private Equity investors
who know that space and they understand
the capital cycle of the mining industry.
"I'm not sure you're going to see new
players in this particular cycle, but I think
Private Equity's always interested in a good
story, a compelling story, so the ones that
are in the space already will continue to
support it."
Even more than mining, much of the fo-
cus of Private Equity in Western Canada
was traditionally beamed at the oil patch.
It wasn't very long ago US Private Equity
firms were flying someone up to Calgary
on a weekly basis to build relationships and
sniff out potential opportunities.
PHOTO:
SHUTTERSTOCK
