Q1 2022 was also just shy of the most private equity deals on record.
More Canadian tech private equity deals are taking place, but the money behind them is down substantially. On the other hand, venture capital investment totals were up in Q1 2022, but deals were down.
A new report from the Canadian Venture Capital and Private Equity Association (CVCA) states that in the first quarter of 2022, $1.4 billion CAD was invested in 212 private equity (PE) deals. That marks the second-highest number of deals for a single quarter on record; 215 deals were made in Q4, 2021.
However, while the deal-making continued apace, the actual dollars invested declined. In Q4, 2021, $4.8 billion worth of private equity flowed into companies.
$4.5 billion was invested across 196 deals in 2022’s first quarter, the second-highest VC investment on record.
The absence of large and mega-deals contributed to a decline in total PE deal value in Q1, according to the CVCA. Out of the PE 212 deals, 92 percent with disclosed values were under $25 million, with the CVCA noting the average deal size continues to decrease.
In the first quarter, the United States showed a similar decline in total deal value, according to Kim Furlong, the CEO of the CVCA.
Late last year some hints could be seen of a potential slowdown. Speculation in late 2021 began to surface over the potential of a tech bubble. The speed and scale of the tech sector’s growth in 2021 led some to speculate that the sector could be headed for trouble.
“Whenever you’re ripping at a pace like this, and in such a hot market, you can also get overextended,” Dave Unsworth, general partner at Information Venture Partners, said in December. “Then, when the markets turn— and when they do turn, they tend to turn quickly—you can end up losing a lot of money.”
After seeing $18 billion invested across 799 deals in the PE market, representing the highest deal count on record (along with the highest number of exits – 88 – and six IPOs), Furlong said at the time that Canada still had significant room for growth.
The largest disclosed PE deal of the quarter was Ontario-based eSentire’s $414 million financing backed by Georgian and CDPQ. Other notable deals include Quebec-based Synex Business Performance Group’s $100 million transaction.
In fact, Quebec led the country with 64 percent of the deals valued at $766 million, including $155 million and 34 deals in Montreal. Ontario had the second-highest amount of investments with half a billion dollars across 46 deals.
Desjardins Capital was the most active investor with 67 deals worth $446 million, while BDC Capital followed in second place with 35 deals worth $174 million.
RELATED: Canadian venture capital investment hits all-time high of $14.2 billion in 2021
In terms of venture capital, $4.5 billion was invested across 196 deals in 2022’s first quarter, the second-highest VC investment on record following $5.2 billion in the second quarter of 2021. But while total investment remained on par with 2021 levels, the deal count in the first quarter of this year experienced the third consecutive quarter-over-quarter decline.
The average disclosed deal size in Q1 was $28.4 million, surpassing the five-year average of CAD $12.7 million. Seventeen mega-deals of more than $50 million valued at $3.3 billion accounted for nearly three-quarters of all the investments.
Those included four deals over $200 million. Noteworthy deals included 1Password’s $775 million raise, and Paper’s $342 million Series D round.
Ontario received over half of all the investments, with a record-breaking quarter worth $2.3 billion over 66 deals. Quebec also posted a quarterly record with $1.1 billion. Alberta and Nova Scotia also posted record investments, respectively $466 million, and $42 million.
Among the top ten largest raises were Koho, Neo Financial, and LayerZero Labs.