A Record Year for Venture Capital and Private Equity Investments – Corporate and Commercial Law

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Venture capital investment in Canadian companies broke records last year, while private equity deals hit an all-time high, according to the Canadian Venture Capital and Private Equity Association (CVCA). ).

Explosive growth in venture capital financing

Venture capital funding in Canada broke records in 2021, with $14.7 billion invested in 751 deals, more than double the previous record of $6.2 billion invested in 539 deals in 2019, according to the HVAC. year-end market overview.

Last year, a record 71 “mega-deals” – deals valued at more than $50 million – accounted for 72% of venture capital funding raised last year. There were 72 venture-backed exits worth $10.6 billion and a record eight initial public offerings (IPOs) worth $3.9 billion.

The hottest sector for venture capital investments was information, communications and technology, which raised $9 billion across 430 deals, more than double the previous record high of $4 billion. raised in 2019. Meanwhile, the life sciences sector raised $1.8 billion across 102 deals – a 50% increase from the $1.2 billion raised in 2020.

In Western Canada, British Columbia recorded the highest volume of venture capital deals (105 deals worth $2.9 billion), followed by Alberta (87 deals worth $2.9 billion). worth $561 million), Saskatchewan (17 deals worth $210 million) and Manitoba (8 deals worth $210 million). at $57 million).

Private Equity Deals Break Records, but Deal Value Falls

Private equity investment in Canadian companies rebounded to pre-pandemic levels last year, with $18 billion invested in 799 deals, beating the previous record of 661 deals set in 2019. But the average value of transactions was relatively low. Eighty-four percent of deals with disclosed values ​​were less than $25 million, and three-quarters of private equity investments went to small and medium-sized enterprises (SMEs).

The CVCA said baby boomers transitioning into retirement account for a significant portion of capital flows to SMEs, noting that nearly 60% of small business owners in Canada are retired or nearing retirement. A 2019 survey by the CVCA and the Business Development Bank of Canada found that 49% of small business owners planned to sell their business in the next five years.

There were a record number of private equity exits in 2021 (88 exits totaling $6.4 billion) and a record 6 IPOs – but those IPOs only raised $1.9 billion. dollars, the second lowest amount on record. A similar trend emerged in the secondary redemption market, with 18 redemptions (a 200% increase from 2020 levels) raising a total of $2 billion (a 24% decrease from 2020).

Most sectors saw increased investment in 2020, led by the financial services sector (up 1,412%), followed by business products and services (up 312%) and clean technology (up 189%) .

In Western Canada, British Columbia recorded the highest volume of private equity deals (52 deals worth $660 million), followed by Alberta (42 deals worth $999 million). million), Saskatchewan (16 deals worth $37 million) and Manitoba (six deals worth $96 million).

What does this mean for investors?

As CVCA data indicates, Canadian companies are attracting venture capital and private equity investors in record numbers, and many sectors with a strong presence in Western Canada, including clean technology and life sciences life, continue to be seen as attractive investments.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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