When the flow of credit to companies dried during the credit crisis, large companies cut expenditures in their Research & Development budgets and hoarded cash. Now that the general economic outlook has eased and companies are starved for innovation, business owners and management are now looking at ways of obtaining growth.
Canada possesses a legacy of strong returns and successful deals. Also, boasting the largest announced leverage buyout of our time.
As Canadians, we live in what is often called the “Great White North”. Our neighbours to the South and the rest of the world have a common perception that there is less competition in Canada. This is a commonly accepted truth for private equity funds as the U.S. has a greater number of funds with larger capital base. However, there is currently no known analytics verifying the perceived lower level of competition.
Currently, Canadians can also boast about the strength of the Canadian economy. No banking system is fundamentally as sound as ours. Our education system and clusters of innovation across the country provide us with a talented and high calibre workforce. Our legal framework is also well developed to facilitate the growth in private equity. And with the continual “Brain Drain” to the U.S., we have Canadians working on both sides of the border.
As an added bonus, Canadian investments are not counted in “foreign” concentration limits for PE funds. Typically, in a PE fund’s investment mandate, the Limited Partner (“LP”) list restrictions in the types, size, risk level, etc. of investments. Such restriction may include the amount that a fund can commit to one investment opportunity (not >25% of entire fund capital) or foreign investments (not >25% of capital committed overseas). The advantage for Canadian companies is that North America is not treated as “foreign”.
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