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Both the venture capital and private equity spaces have seen a flurry of activity in recent months. In the venture space, Ottawa software darling Shopify Inc. recently filed for an initial public offering that could raise $100-million.Tim McKenna/The Globe and Mail

Private capital reached a high point in recent months, with Canadian private equity buyouts setting records in the first quarter and venture capital investments climbing.

Amid oil price declines and market enthusiasm for new public offerings, investors contributed to strong deal-making and investment results, according to a report from Thomson Reuters that details the first-quarter highlights in both the private equity and venture capital spaces.

Private equity (PE) firms and funds participated in $6-billion worth of buyout deals in the first quarter of 2015 – the highest first-quarter results on record. And venture capital (VC) investment in Canadian companies hit its stride with $548-million invested in 137 deals in the first quarter of the year, a 41-per-cent increase from one year earlier and the strongest showing since 2007.

Both spaces have seen a flurry of activity in recent months. In the venture space, Ottawa software darling Shopify Inc. recently filed for an initial public offering that could raise $100-million. And private equity has attracted some big names, such as Veresen Midstream LP's $760-million purchase of natural gas assets, which was backed by Kohlberg Kravis Roberts & Co. LP (KKR). The largest move in the quarter was Brookfield Asset Management Inc.'s privatization of land development and home-building business Brookfield Residential Properties Inc. for about $1.1-billion.

"The feeling in the private capital world is that we're growing and things are going really well. On the VC side, there's a bunch of sexy things hanging in the window, and on the PE side, we're setting records. It's an incredible market right now," said Mike Woollatt, chief executive officer of industry group Canadian Venture Capital & Private Equity Association (CVCA).

Still, the data show room for improvement in areas such as venture capital fundraising by Canadian funds, which has been weak in the past year. In the first quarter, only $249-million was raised – less than half what investors drummed up at the same time in 2014. Thomson Reuters said this mirrors a U.S. trend of fewer dollars raised.

"With substantially fewer Canadian fund managers closing new funds, Canadian companies may struggle to attract follow-on rounds in the years to come, or be forced to seek more capital from investors south of the border," Gavin Penny, Canadian deals and private equity lead at Thomson Reuters, said in a statement.

Whitecap Venture Partners bucked that trend on Monday by raising $70-million for a new fund, which for the first time included outside investors such as Bank of Montreal and Kensington Venture Fund. The company said opening its doors to new capital would provide the opportunity to fund bigger deals and make follow-on investments. The fund, Whitecap III, will invest primarily in Canadian companies in technology sectors such as information and communications, medical and food, which it says are growing.

And the Canadian venture capital market has some advantages compared with the U.S. at this moment, such as being less competitive, Mr. Woollatt said. This is because company valuations appear to be more reasonable than they are south of the border – but only somewhat. "They are still high, and kind of frothy some would say," he said, adding that arguments could be made for or against bubble conditions where high equity prices are disconnected from company fundamentals.

The collapse in oil prices is another trend that could change the investment landscape for private equity firms in the coming year. The CVCA's survey of its members found that 61 per cent of private equity respondents said depressed oil prices are a boon for their business.

Companies in Alberta were able to raise $3.6-billion in private equity capital in the first quarter, according to Thomson Reuters data, which marked the province's best quarter ever. Since the deals in Alberta were very large, the actual number of transactions fell in the quarter.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 27/03/24 4:00pm EDT.

SymbolName% changeLast
BAM-N
Brookfield Asset Management Ltd
+0.82%41.8
BAM-T
Brookfield Asset Management Ltd
+0.64%56.71
BMO-N
Bank of Montreal
+0.43%96.38
BMO-T
Bank of Montreal
+0.32%130.77
SHOP-N
Shopify Inc
+0.11%78.62
SHOP-T
Shopify Inc
+0.15%106.7
TRI-N
Thomson Reuters Corp
+0.55%155.95
TRI-T
Thomson Reuters Corp
+0.41%211.67

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