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Canadian venture capital, private equity activity surges in 2014

Reuters

By Euan Rocha

TORONTO (Reuters) - Deal-making activity in Canada's venture capital and private equity markets surged in 2014, driven by a spate of deals in the burgeoning tech start-up sector and large investments in oil and gas companies, data from Thomson Reuters showed on Tuesday.

Private equity investments more than tripled from 2013 levels to C$32.2 billion ($25.62 billion) in 2014, while venture capital funding rose 21 percent to C$2.36 billion.

The stunning jump in private equity investment was largely driven by U.S. fast food chain Burger King's [BKCBK.UL] C$12.64 billion takeover of Canadian coffee and donut chain Tim Hortons, a deal that created the world's third-largest fast food chain.

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That acquisition was backed by investments from billionaire investor Warren Buffett's Berkshire Hathaway (BRKa.N) and Burger King's majority investor 3G Capital.

Calgary, Alberta-based Encana's (Toronto:ECA.TO - News) sale of its Bighorn assets to Apollo Global-backed (NYSE:APO - News) Jupiter Resources for C$2 billion and Lululemon Athletica (NasdaqGS:LULU - News) founder Chip Wilson's sale of half his stake in the clothing company to private equity firm Advent International for C$864 million were among other marquee deals.

The number of private equity deals spiked 22 percent to 410 in 2014 from 335 the prior year, according to the data.

VENTURE CAPITAL SURGE

In 2014, Canadian start-ups received some C$2.36 billion in funding, a 21 percent jump from a year ago and nearly double the C$1.2 billion invested in the space five years ago.

The surge was driven by large financings for companies like Kitchener, Ontario-based Desire2Learn, Vancouver's Hootsuite Media, St John's, Newfoundland-based Verafin, and Edmonton-based Aurinia Pharmaceuticals.

The deal activity still pales in comparison to the U.S. market, where early stage companies reaped a US$48 billion bonanza in investment last year. Canada's average round size of C$4.5 million also lagged far behind the average U.S. deal size of C$12.5 million.

Beneficiaries of the surge in venture capital funding in Canada include the burgeoning number of start-ups in and around BlackBerry's (Toronto:BB.TO - News) hometown of Waterloo, Ontario.

Communitech, which incubates tech companies in the Waterloo region, said tech start-ups in the area have raised C$284.3 million year-to-date, up from C$101.6 million last year. Its current fiscal year ends April 30.

(Reporting by Euan Rocha; Editing by Meredith Mazzilli)