Private equity was heavy into mining last year
tim kiladze
Globe and Mail Update
Posted on Thursday, February 16, 2012 1:48PM EST
The headline numbers show that Canadian private equity dealmaking popped last year, but overall figures are still far off peak levels.
So what’s more interesting? That private equity is still interested in Canada’s robust mining sector, with over 50 deals getting struck last year, the most of any sector.
Some of these were of decent sizes, including Energy & Minerals Group investment in Baffinland Iron Mines Corp., in a deal worth $590-million, and Ellington Investments buying into Inmet Mining in a deal worth $500-million. But the majority of these deals are ones the general public doesn’t hear about because private equity is happy to invest in companies with small undeveloped assets in hope of riding the valuation wave as the assets move into production.
Overall stats are still important, though, and $11.5-billion was raised last year, according to Canada's Venture Capital and Private Equity Association, in partnership with Thomson Reuters. That’s an improvement over the last few years, but still far off the $23-billion raised in 2006 and the high of $26-billion in 2007. In fact, last year’s level was only half of 2006’s. And in 2011, only two deals were worth more than $1-billion. (But I suppose everything is relative because there were none in 2010.)
Also of note, almost half, or 46 per cent, of last year’s private equity deals were minority-equity investments, rather full blown takeovers.
Canada’s recovery also appears to be on par with the U.S. If you multiply the value Canada’s total private equity dealmaking by 10 times, to account for our population differences, we’re at roughly the same levels as the U.S. (The same is true for the growing venture capital recovery.) Actually, in the recent past, the only year in which Canada was far off the U.S. total was 2007 when private equity deals south of the border skyrocketed, only making their post-crisis plummet that much worse.
In 2011’s, Canada’s top fund formations were led by Catalyst Capital Group’s $1.0-billion (U.S.) distressed-for-control partnership and Onex’s $800-million fundraise in mid-May.
AI
