Private Equity at Work

Private Equity at Work

Private Equity Is a Partner in Driving the Growth of Canadian SMEs

How Does Private Equity Work?

The active management that a private equity partnership brings to its portfolio companies helps them to become more successful businesses with stronger, more sustainable futures.

Canadian Private Equity At Work

On December 1, 2020, CVCA shared the results of a new study on the economic impact of private equity in Canada. The Study was based on findings from PwC Canada and was commissioned by the CVCA. The study demonstrates that, in partnership with founders and management teams, PE funds have a significant positive impact on investee companies, particularly through employment growth, capital investment and productivity gains.

According to CVCA Intelligence, over 65% of PE transactions in Canada are under CAD $25M, highlighting the direct connection between Canadian PE investment and Small and Medium-Sized Enterprises (SMEs). SMEs are the backbone of the Canadian economy and according to Statistics Canada, supports over 85% of all new jobs across the country.

The majority of investors in private equity funds are pension plans and other institutional investors. The success of these investments provides income security and supports the retirement ambitions of Canada’s middle-class which include Canadian teachers, first responders, and autoworkers.

Private Equity’s Impact: Key Findings

The PwC Canada study demonstrates that private equity is a long-term partnership with the aim of making Canada’s small and medium-sized companies bigger, stronger and more profitable. Private equity partners with companies with a strong track record of revenue growth, but lower profitability and capital spend levels that provide headroom to increase.

Following the private equity investment:

  • Employment Growth: The investee companies experience employment that significantly exceeds those seen in benchmarks.
  • Capital Investment: Investee companies tend to increase capital spending.
  • Revenue Growth: PE-backed companies maintain strong levels of growth in revenue.
  • Profitability: Non-PE-backed companies fared worse than PE-backed companies; pre and post-deal.
  • Productivity: PE-backed companies encounter strong growth in productivity post-investment.
Cvcapwc

EMPLOYMENT GROWTH

Employment growth at PE-backed companies was three times greater than non-PE backed equivalents. On a cumulative basis, the typical PE-backed company added almost one quarter (24%) to its headcount in the three years post-investment.

Employment Growth updated 01

CAPITAL INVESTMENT

Capital investment, as a share of revenue, rose by 75% in PE-backed companies post-deal, significantly faster than non-PE backed benchmarks.

Capex % of Revenue

REVENUE

Revenue in PE backed companies maintained double digit growth post-investment (averaging 10.9% per annum), which is significantly higher than non-PE backed benchmark companies.

Revenue Growth

PROFITABILITY

Profitability in PE-backed companies was higher than equivalent-sized companies listed on the TSX

EBITDA Margin

PRODUCTIVITY

Productivity in PE-backed companies experienced over twice the rate of productivity growth in the 3 years following the initial PE investment.

Productivity Growth updated 01

Private Equity: A Significant Driver of Growth For Canadian SMEs


The full report contains background, key findings along with data tables, case studies, and detailed methodology.

Private Equity At Work

How a PE Partnership Unlocked the Potential for Nova Scotia’s Bluewave Energy
How a PE Partnership Unlocked the Potential for Nova Scotia’s Bluewave Energy

Birch Hill’s investment helped Bluewave make a total of 16 acquisitions over three years that more than tripled the size of the…

Strong Saskatchewan Roots With Growing Global Reach: How A PE Partnership Positioned Degelman And The Community For Growth
Strong Saskatchewan Roots With Growing Global Reach: How A PE Partnership Positioned Degelman And The Community For Growth

This investment will continue to drive economic growth not only in our province by fueling Degelman’s success here at home but…

Moving Combat from M to L: Private Equity at Work
Moving Combat from M to L: Private Equity at Work

By 2015, Finucan decided it was time to recapitalize the company he bootstrapped and grew organically from the ground up. He now…

Private equity-backed Weatherhaven is helping communities combat COVID-19
Private equity-backed Weatherhaven is helping communities combat COVID-19

Fulcrum didn’t just come with the funds, Castelli says, but the experience and strategic insight to help Weatherhaven cope with…

OP-ED // Private Equity: The Engine That Fuels Canada’s Growth
OP-ED // Private Equity: The Engine That Fuels Canada’s Growth

I joined the CVCA a year ago with limited knowledge of private capital. I had been exposed to venture investing, to some degree,…

When they made the choice to grow their company, CustomAir turned to Private Equity
When they made the choice to grow their company, CustomAir turned to Private Equity

It was an interest and expertise in mechanical services that led Peter Harteveld to co-found CustomAir in his Metro Vancouver…

Private Equity Partnership: The Success of Bestar Inc.
Private Equity Partnership: The Success of Bestar Inc.

Photo from bestar​.ca. It was nearly two years after selling his door manufacturing business to Masonite International Corp. that…

Cieslok Media: A Serial Entrepreneur’s Journey with Private Equity
Cieslok Media: A Serial Entrepreneur’s Journey with Private Equity

Photo Credit: Bell Media (Former Cieslok-owned Media Billboards, Yonge-Dundas Square, Toronto, Canada) A PE Partnership that took…