Canadian PE & Foreign Investment, 2014

  • Posted By: Ari Cuperfain

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  • Comments: 1

In each of the last nine years, more than half of PE investments in Canadian businesses have been by funds outside of Canada. In 2014, the percentage of foreign PE investors was at an all-time high of 62%. Moreover, foreign investment in Canadian businesses has been growing steadily over the past decade, outpacing investments by Canadian-based PE firms. Technology continues to reduce the relevance of geography for PE investments that are further afield.

As discussed in our earlier post about Canadian Private Equity in the Global Context, this significantly expands the pool of potential investors. There are roughly twenty times as many PE firms in the U.S. as in Canada, and many consider Canadian businesses within their investment criteria. The growing participation of foreign PE investors in the Canadian private market is expected to continue through 2015.

The U.S. has always been the dominant foreign investor, but the rest of the world is becoming more involved. Over the last ten years, while both U.S. and rest of world foreign PE investment in Canada have increased, rest of world investment has grown at a faster rate than the U.S. The takeaway message: PE is no longer restricted to local environments. Capital moves freely across borders and closing the door on foreign investors excludes hundreds of potential bidders.

As we will see, forgoing potential foreign acquirers is deleterious to the overall sale of a business. Our next discussion will focus on capital structure for U.S. buyouts and how it relates to the 2014 Canadian and global PE environment.

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