Over 100 Canadian private equity and pension fund leaders share what they think is next for private equity in Canada in our second annual industry survey.

Get the pulse of the Canadian private equity industry, where investments are heading, what role the pandemic may play in the year ahead and more in our commentary.

PE Pulse 2021 report cover

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Executive Summary

The results of our second annual Canadian private equity survey show much optimism for 2021. The private equity and pension fund professionals who responded to our survey expect to see an overall improvement in the transaction environment that will drive dealmaking and fundraising activities throughout the year, despite uncertain global economic conditions as the pandemic persists.

Following the onset of the pandemic in 2020, many in the private equity industry put plans on hold as they worked to quickly respond to the COVID-19 crisis. Part of the optimistic sentiment from respondents can be attributed to the challenges of 2020, with the majority of respondents believing the relative outlook for 2021 will be much improved. More transaction volumes, better debt financing terms and heightened M&A activity are all expected, and year over year, twice as many respondents also anticipate it will be easier to raise new funds in 2021.

Despite the generally positive outlook, challenges persist. Competition for new investment opportunities continues, valuation multiples remain high, and some businesses that have shown COVID-19 resilience, are commanding a premium. LPs continue to expect sponsors to deliver co-investment opportunities. And the ongoing disruption caused by COVID-19 is influencing deal terms, with four out of ten respondents expecting to see the use of earn-out provisions to address valuation gaps.

Valuation multiples paid for new platform investments are largely anticipated to rise this year, with pension funds in particular expecting higher valuation multiples. However, there is a shift in sentiment among investors, with more respondents considering whether vendor pricing expectations may be softening.

Technology remains the sector of choice for dealmaking opportunities in 2021, and while sentiment toward sector opportunities remains consistent with 2020 survey results, other sectors are presenting renewed interest from private equity and pension fund professionals, including industry/agriculture, entertainment, personal care and services.

Ultimately, although our survey results reflect the resilience and optimism in Canadian private equity, the pandemic crisis is not over yet, and most respondents identified it as the top challenge for 2021. The many knock-on effects of the pandemic continue to impact the private equity industry, impeding business development, face-to-face meetings with investors and management teams, and ongoing market volatility and disruption.

While the current environment is putting pressure on the private equity market, the sophistication of its players is pervasive, and over 40% predict higher private equity allocations this year—a strong indicator of opportunities and activity in the year ahead.

To discuss these issues, please contact the author(s).

This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

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