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2018 VC & PE Québec Market Overview

March 2019

4 Mega-Deals Drive VC Investment; Québec Captures Over 60% Of All Canadian PE Deals

 

Montréal-based Hopper is the second largest venture capital deal in Canada in 2018; Québec leads the country in private equity investment

 

There were four mega-deals ($50M+) in VC investment totalling $353M, in the province in 2018. They included Montréal-based Hopper Inc.’s $129M series D round from a syndicate of investors including Fonds TIC BDC, Brightspark Ventures, Caisse de dépôt et placement du Québec (CDPQ),, Investissement Québec and OMERS Ventures Management Inc., Montréal-based Milestone Pharmaceuticals Inc.’s $103M series D round from an investor syndicate that included Fonds de soins de santé BDC and Breather Products Inc., and Montréal-based Breather Products Inc.’s $59M round from a syndicate that included Caisse de dépôt et placement du Québec (CDPQ).

Québec captured 28% of the total number of Canadian VC deals (172 out of 610) and 29% of dollars invested ($319M out of $1.7G). These mega-deals accounted for 32% ($353M) of total VC investment, which is down from its 61% share in 2017.

Excluding mega-deals, the average deal size in 2018 was $4.4M, a 24% increase from the $3.5M last year. Slightly over a third of VC activity (55 out of 165 deals) was in deal sizes between $1 M-$5M, followed by deals between $100 K-$500K capturing a 22% share (38 out of 172 deals).

The share received by life sciences companies increased dramatically from last year—19% to 30%, whereas ICT companies garnered $597M—a 55% share of total dollars, up 1% from its 2017 share.

Québec captured 62% of all Canadian PE deals (338 out of 543)—more than three times greater than Ontario’s 19% share. There was a 1% increase in the number of deals in 2018 (338) compared to the 336 deals in 2017. However, total PE dollars dropped 35% from $10.6B to $6.9B. 27% of deals (92 deals) went to companies in the Industrial and Manufacturing sector with 13% going to the ICT sector (43 deals).

The $509M follow-on investment into Stingray Digital Group Inc. was the largest deal this year, with a joint investment from Caisse de dépôt et placement du Québec (CDPQ), Fonds de solidarité FTQ and Investissement Québec. The second largest deal was the $320M privatization of Centre-du-Québec’s NAPEC Inc. by a global investment firm.

Québec Venture Capital Highlights

  • $473M was invested over 42 deals in Q4 in Québec—61% more than the previous quarter ($293M) and 9% lower than the same quarter last year ($517M).
  • Although the average VC deal size ($6.3M) dropped 28% from last year ($8.7M), it was 24% higher than the average for the five-year period 2013-2017 ($5.1M).
  • Four $50M+ mega-deals accounted for 32% of total VC investment in the province, down from its 61% share in 2017.
  • Excluding mega-deals, the average deal size in 2018 was $4.4M, a 24% increase from the $3.5M last year.
  • Québec captured 28% of the total number of Canadian VC deals (172 out of 610) and 29% of dollars invested ($1.1G out of $3.7G).
  • Slightly over a third of VC activity (55 out of 165 deals) was in deal sizes between $1 M-$5M, followed by deals between $100 K-$500K capturing a 22% share (38 out of 172 deals). A fifth of all deals were between $5 M-$20M.
  • ICT companies garnered $597M, a 55% of total dollars—up 1% from their 2017 share. The share received by life sciences companies increased dramatically from last year—19% to 30%.
  • Montréal-based companies received $901M over 119 deals, second only to Toronto-based companies that received $1.5B over 197 deals.
  • There were an equal number of seed and early stage deals that captured 5% ($50M) and 34% ($370M) respectively of total dollars. 65 deals were closed in later stage companies representing a 59% ($637M) share of total dollars.
  • There were 12 exits (or partial exits) involving Québec-based companies which included:

Québec Private Equity Highlights

  • $2.8B was invested over 81 deals—2.7 times more than the previous quarter and 30% higher than Q4 2017.
  • The average deal size increased 152% from $13.5M the previous quarter to $34M.
  • There was a 1% increase in the number of deals in 2018 (338) compared to the 336 deals last year. However, total PE dollars dropped 35% from $10.6B to $6.9B.
  • Québec captured 62% of all Canadian PE deals (338 out of 543)—more than three times greater than Ontario’s 19% share.
  • 4 out of every 10 deals were between $1 M-$5M, with deals between $5 M-$25M capturing a 21% share of the province’s deal flow.
  • 27% of deals (92 deals) went to companies in the Industrial and Manufacturing sector with 13% going to the ICT sector (43 deals).
  • There were 64 exits involving Québec-based companies. The largest of those included:
    • The $3B corporate buyout of Atrium Innovations Inc. by Nestlé; selling investors included Fonds de solidarité and Caisse de dépôt et placement du Québec (CDPQ).
    • The $1.9B Camso acquisition by Michelin; selling investors included Caisse de dépôt et placement du Québec (CDPQ).

 

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