Osler sees more opportunities for PE and VC funds in Canadian financial trends

Frank Turner, Chad Bayne

Jan 17, 2014

Kirk Falconer, peHub

[Extract]

Energy companies experienced a more than 80% year-over-year decline in M&A activity last year. They also faced shortages of investment capital due to trends in public and private placement markets. And the sector was hit hard by recent changes to federal rules governing acquisitions of Canadian producers by foreign state-owned enterprises (SOEs).

Osler partner Frank Turner told peHUB Canada that these conditions have created a “perfect storm” for energy and other resource businesses with respect to capital availability.

“Junior and mid-market issuers are finding that they can no longer finance their growth plans as they once did,” he said. “And major energy companies that previously relied on SOE investments have also been left with fewer options. This absence of funding alternatives is being matched by greater receptivity in resource sectors to private equity investment.”

There was considerably more PE investment in Canadian resource sectors in 2013, with some observers suggesting that related transactions accounted for almost 25 percent of the new capital raised by oil and gas alone. “We will see more of this in 2014,” said Turner.

....

Last year also saw especially well-capitalized financings of a new generation of tech companies, such as social relationship platform HootSuite Media – which raised US$165 million from Insight Venture Partners, Accel Partners and OMERS Ventures. Osler was the lead counsel to HootSuite on this deal, the largest in the history of Canada’s venture market.

Osler partner Chad Bayne believes that such financings are “absolutely essential” if Canada is to effectively leverage worldwide innovation trends.

“Canadian technology startups have typically been under-capitalized,” he said. “When young companies are ready to hit the accelerator and compete on a global stage, they too often lack the necessary funding. This is very different from the experience in Silicon Valley, where startups can get money at higher valuations and receive the VC backing they require to grow more quickly.”

Equity trading markets were also more responsive to technology offerings in 2013. Bayne welcomed this development, arguing that if Canadian innovative companies are to grow to scale, they must in future have more opportunities for going public. 

....

To read the entire article, click here.