CVCA-Market stability seen boosting Canada buyout industry

* Low interest rates help M&A

* IPO market still stumbling

By Pav Jordan

OTTAWA, May 27 (BestGrowthStock) – The measure of success for the
private equity industry is called “exits” — the exiting from
investments to make another move — and the gauge may be on the
way up in Canada as markets stabilize and investors look for
ways to sell assets held for years, fund managers say.

Despite recent turbulence sparked by events in Europe,
markets around the world have stabilized in recent quarters,
with credit and debt markets returning and supplying leverage
that is key to financing mergers and acquisitions.

Pundits say there is a backlog of dozens of companies in
Canada ready to either be sold or taken public.

“We’re seeing a lot of discussion now around exits, but
very few have actually happened yet,” Rick Nathan, managing
director at Toronto-based Kensington Capital Partners, said on
the sidelines of the annual Canadian Venture Capital and
Private Equity Association (CVCA) conference.

Exits, which get their name from investors exiting
investments to get their money back before they make their next
move, experienced a drought through the recent financial crisis
and recession in large part because buyers and sellers could
not agree on valuations.

“I think that our overall industry is moving out of
recession fairly effectively. It is still in the beginning
stages of that recovery but it’s definitely happening,” Nathan
said.

“I think we should expect to see a lot more (exits) through
the balance of the year unless there is some other major new
event,” he said.

Exits are usually done through mergers or acquisitions or
through initial public offerings on stock markets.

Investors tend to prefer selling their assets to other
companies, rather than taking the IPO route, because the
valuations are higher and payout is more immediate.

The IPO market is also still trying to find its stride, as
evidenced by the difficulties some companies have had in
valuing deals.

A case in point is the IPO of Canada’s Porter Airlines,
which has had trouble stirring the appetites of institutional
investors.

Low interest rates make the debt component of deals easier
to arrange, making strategic mergers all the more attractive.

“Probably upward of 70 percent of our exits come from M&A,”
said Chris Albinson, a Canadian native and the managing
director of Panorama Capital, a Silicon Valley investor in
venture capital.

A record number of investors are in Ottawa this week for
the May 26-28 conference, the largest of its kind in Canada,
where investors, fund managers and bankers will sit down to map
out strategies for an economy that is gathering steam.

“I think 2010 could actually turn out to be quite good for
exits,” said Joe Topley, a managing director for Parish Capital
Advisors for Europe.

He pointed at a series of factors that could influence the
number of transactions, including the need for funds to deploy
capital as they come to an end of investment periods.

“If you come to the end of your 10-year investment period
and you haven’t used it, you lose it,” he said.

Investment
(Reporting by Pav Jordan in Ottawa; editing by Peter
Galloway)

CVCA-Market stability seen boosting Canada buyout industry