Dramatic growth in the Canadian buyout market led to record levels of private equity investment in 2006, according to Canada’s Venture Capital and Private Equity Association (CVCA) and research partner Thomson Financial.

The total value of disclosed investments into Canadian companies made by buyout funds during the year amounted to US$10.9 billion, more than double the US$4.5 billion reported in 2005.

Fundraising by Canadian buyout funds also reached record levels, with $6.4 billion in new capital commitments, more than four times the $1.4 billion total raised in 2005.

“There is clearly no shortage of attractive investment opportunities in the Canadian buyout sector,” observed Rick Nathan, CVCA president and managing director of Kensington Capital Partners, in a news release. “The dramatic growth in new capital committed to Canadian buyout funds – record levels in 2006 – still amounts to just half of the total value of direct buyout investments made by these funds into Canadian companies.”

Foreign investors are filling the gap. Of the total US$10.9 billion in reported buyout investment, approximately US$3 billion was invested by Canadian-based funds (27%), with US$4.1 billion invested by U.S.-based funds and US$3.9 billion from buyout funds based in the rest of the world.

These trends in the Canadian market are part of a broader global trend driving record levels of private equity fundraising and investment in the U.S. and other international markets. “In Canada, we are growing as fast as we can, but we are just barely keeping up with the global market,”
noted Nathan.

Major Canadian private equity investors are also participating in the broader global markets. Canadian funds (including major Canadian pension funds making direct private equity investments) invested US$13.4 billion in the global private equity markets in 2006, up sharply from the US$5.4 billion invested in 2005.

Across the Canadian private equity market as a whole — including buyout, venture capital and mezzanine debt funds — total new fundraising in 2006 amounted to $8.6 billion, more than double the $3.9 billion reported in 2005, and another record level.