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Boom For Canadian Private Equity?
Pav Jordan of Reuters reports, Mood upbeat for Canada private equity conference:
A
resilient Canadian economy is drawing levels of private equity
investment not seen since 2008 and attracting global technology giants
like Google, Groupon and Microsoft.
Experts
say technological innovation is blurring the traditional lines between
venture capital, which typically invests in early stage technologies,
and private equity, which is crossing increasingly into the sector that
in Canada helped give birth to companies like Research In Motion,
maker of the BlackBerry smartphone.
"When
you have the major large-cap, technology companies in North America
sitting on $500 billion in cash reserves, and with very aggressive
growth plans for their own businesses, in an environment that is
changing at light speed, they can't get there just by their own
research and corporate development efforts, so they need to get there
through acquisitions," said Steve Hnatiuk, chairman of the Canadian
Venture Capital and Private Equity Association's annual conference.
The
CVCA's meeting in Vancouver this week is attracting a record 600-plus
participants, who between them represent hundreds of billions of
dollars in investment capital.
This
year's participants will for the first time include U.S. technology
and social networking giants that are looking to Canada to buy
technologies they cannot develop in-house, as well as the Canadian
pension funds that were some of the world's largest private equity
investors in recent years.
The
Canada Pension Plan Investment Board, the country's second-largest
pension fund administrator, will be a big winner when Microsoft buys
Internet phone service Skype for $8.5 billion in its biggest-ever
acquisition, placing a rich bet on mobile and the Internet to try to
best rivals such as Google.
Private
equity firm Silver Lake, eBay Inc and investors including CPPIB are
seen making $5 billion on the deal, tripling their investment.
BOOMING LIQUIDITY
Google,
Microsoft and RIM, have all announced acquisitions in Canada over the
past year, quietly creeping into the country's venture capital
landscape.One CVCA panel
will focus on the rise of Internet companies like Zynga, Facebook,
Amazon, Google, Groupon and PayPal PAPXX.O, which have become
multibillion-dollar operations in recent years even as traditional
media companies decline.
But industry players say new business
models that address the changing investing landscape mean problems,
pitfalls and opportunities in private equity and venture capital.
"The
venture community and even the PE (private equity) community are going
through some structural change, and have been for the last three
years," said Ross Bricker, chief executive of the AVAC venture capital
fund from Calgary, Alberta.
"Over
the last year and a half, we've seen a cautious return to investment,"
said Bricker, who has about 55 venture companies in his portfolio.
Canada's famed recession-era resilience has also made it a magnet for private equity and venture investors.
Soaring
liquidity, backed by corporate players with stock valuations that have
recovered from crisis-lows, and a budding appetite for initial public
offerings, are creating a dealmaking environment not seen since 2008.
"The
last 12 months or so have seen an obvious and clear uptick in the
market generally, and I think what we'll see this week is an entirely
different mood among the investment community," said Rick Nathan,
managing director at Kensington Capital Partners, a Toronto-based firm
with some C$500 million ($510 million) in capital under management.
"I
know just from my own schedule that there's a lot of people that I
want to meet with and who want to meet with me, and that's great," said
Nathan, who is moderating a panel on Thursday on asset allocations.
The
conference is also one of the largest of its kind in North America and
attracts global and regional investors, including some of the world's
largest venture capital players.
In related news, Takeover Chatter reports that CVCA-OMERS aims to build private equity portfolio:
OMERS,
one of Canada's largest pension fund administrators, aims to bolster
its private equity portfolio as it builds on a strategy of buying
companies and working with existing management to enhance value, a
senior OMERS executives said. OMERS, or Ontario Municipal Employees
Retirement System, will look for deals in the C$100 million ($102
million) to C$500 million range, the size at which it usually targets
acquisitions, Jim Orlando, managing director for private equity, told
Reuters in an interview. "Net-net, we will be buyers, and net-net, we
intend to increase the number of portfolio companies we have under
management," Orlando said ahead of the annual Canadian Venture Capital
and Private Equity Association conference in Vancouver. Teaming
with private equity firm Berkshire Partners LLC, OMERS earlier this
month said it would purchase Husky International from Canadian takeover
shop Onex Corp (OCX.TO) for $2.1 billion. It was the latest in a recent flurry of secondary buyouts -- where one private equity firm sells to rival buyout firm.
Onex
made money off the Husky deal, but what remains to be seen is how OMERS
will turn around and sell it a higher price. I exchanged thoughts with a
senior pension fund manager who commented the following on OMERS:
They
have big ambitions, bigger than we have. We are trying to make a
profit, not a relative percentage, and don't care how we execute. There
are many clever ways to transact, direct is just one option. If they
have staying power, no reason why they are destined to fail. I
see more deal makers than investors over there, so we shall see how it
goes. Looks like mostly co-investing so far, which is no bad thing,
so not sure what they are doing is worthy of much attention. They
still have the largest part of their portfolio in funds, as do OTPP
and CPPIB, so unless they disclose their direct performance and
separate club and co-investment from their own deals, one will never
really know where the true portfolio attribution lies.
I
also think it's mostly co-investing, which as this person says, is not a
bad thing. More and more Canadian pensions are bringing assets
internally but the truth is they do not disclose the performance of
direct deals or internal absolute return strategies in public markets.
Why? Because of reputation risk. If things are going well, no problem,
but if someone loses billions, they send him or her away with a nice
cushy package and hush it all up.
How do I know this? I've seen
senior managers lose billions, get fired with a cushy severance and it's all
covered up so that the media doesn't get a whiff of it. I'm telling you,
I can write a book on the stuff I've seen in the pension industry, and
it's not all pretty. Every single pension fund has skeletons they want
to keep hidden from the public. To be fair, you can say the same of any
large organization, but I hold public pension funds to a higher
standard.
Getting back to the initial article on the Canadian
economy drawing levels of private equity investment not seen since
2008, that makes me very nervous. Why? Because typically PE activity
picks up strongly at the top of the market. The Canadian economy is
firing on all cylinders but the Canada bubble fueled by Canada's mortgage monster will eventually burst, and when it does, Canadian private equity will get clobbered.
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A country of ignorant fools.
I work in government as a building inspector, these idiots are taking out 5% down mortgages, buying $350,000+ homes, two new cars leased, and landscaping the hell out of there homes, sinking every cent they have into there homes. Most are nearing retirement, and most have extremely unstable work, and think the recession is over and done with, derrr.
I said I'm buying gold and silver, I'm the only one here who can, 90% have no fucking savings because they are maxed out on monthly payments for massive houses they don't need, and new cars they can't afford.
When the US goes pop, Canada goes KaBOOM this time. I just can't get over how these morons haven't learned a thing from the US housing meltdown, they really are just that stupid!!
The pensioners are the most screwed, they have no fucking savings because they blew it all on there dumbshit kids useless university degree in english literature and a condo in Florida. Now when those assfuckers at OMERS and the other pension funds lose everything when the US meltsdown, those pensioners will have no savings, no income, and no clue because they are fuck tards who watch wheel of fortune and think of nothing but the good ol days.
I am Canadian, and trust me, the people here are dumber than the Americans, and even more indebted.
little doubt you work in government, thanks for sharing your thoughts, tell me on whose time and whose computer did you post your comment?
PS I love the irony of your name "by ExploitedCitizen"
Agreed.
I agree. I live in T.O and see nothing but morons. i know of many young couples buying $500,000 + houses, 4 bedrooms +, but they have no kids. INSANE.
and yes, the debt levels here for the average person is higher than in the US in late 2006. It seems to me people here live in la la land.
they are going to get a rude awakining pretty soon.
Your comment on debt levels is interesting perhaps you could provide some supporting data and in addition data on income levels and carrying costs in Canada today versus the US in 2006.
Am I on Candid Camera?
if the currency is a sign of health for the economy,,,,,,
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3225058&cmd=show[s231130698]&disp=P
a fine country.
Strong in relation to USD. The grass isn't that much greener. 13% HST (sales tax) in Ontario, 10% unemployment in the town I am in right now.
I love the euphemistic phraseology, obviously supplied by a PE public relations firm "working with existing management to enhance value", which really in most cases means rape and pillage the place and flip it in 3 to 5.
_________________________
I am not sure how RIM etc making aquisitions is mixed up with traditional PE when an aquistion that RIM would make is strategic. As for VC being blurred with PE - only in a PE Jackals dreams; the original backer of RIM was a company called Working Ventures Canadian Fund (a private equity VC). If anything it was the combo of VC / Public mkts that was the magic in that deal.
Hopefully someone buys CMHC before the taxpayers have to buy it.
Leo,
I dont always agree with what you post but I respect and thank you for your efforts.
btw: nice piece of work today
Hey Leo, no shit this is a good time for any country that has remained relatively unspoiled (by human activity) for the last couple hundred years. All top fund managers have subconsciously recognized the ponzi for what it is, only now they are beginning to shake off all that academic brainwashing. No surprise that they sequester these guys away when funds lose money. Sheesh. Give me something I can trade with already.
Holy cow! I'm in Canada on business and not an hour ago I heard a private developer pitching the sale of his company to a Mr. Money McBags Canadian pension fund manager. Fascinating talk until the guy mentioned his company is in negotiations to do a deal with a major California University. Money McBags cut him off immediately with the sentence, "You know - California is bankrupt. They can't pay you. We're not interested in deals like that."
The developer guy couldn't back peddle fast enough!
PEAK!!!!
Nasdaq in a great place for a sell entry
http://deadcatbouncing.blogspot.com/