Canadian Buyout Review

Full Year 2018

Ben Nelms, Table of Contents

Canada’s PE Buyout Market in 2018 3 $ Invested and # Companies Financed 5 Investment by Company Location 7 Investment by Transaction Type 8 Investment by Investor Location 9 PE Investment vs. all Canadian M&A 10 Top PE Buyout Deals 11 Investment by Deal Size 12 Investment by Company Sector 13 Canadian Firms’ Investment Abroad 14 Buyout Funds Raised 16 PE Buyout-Backed Exits 17 PE Buyout Returns 18 Explanatory Notes & Contacts 19

2 Canadian Private Equity Buyout Market Activity: Full Year 2018

Canadian Buyout-PE Market Trends

Canada saw a record-breaking year of investment from buyout and related private equity investors in 2018, with 345 transactions collectively valued at $37.2 billion. Collective deal values for the year smashed the previous record set in 2007, when Canadian companies received $33.7 billion in investment. Deal volumes, however, were down 10% from the year prior, indicating more investment dollars flowing into fewer deals.

The $5.0 billion secondary sale of Bolton, Ontario-based Husky Injection Moldings Systems by OMERS Private Equity and Berkshire Hathaway to U.S. private equity firm Platinum Equity, has retained the number one spot in both Canada’s top deals list and top exits list. Ranking second and third on the list were Enbridge’s natural gas gathering and processing business, and Enercare, both having been acquired by Brookfield Asset Management for $4.3 billion apiece.

Canadian Market Trends by Sector & Stage

The Information Technology & Media sector remained the most active throughout the year, with 54 deals collectively valued at $3.9 billion. The consumer-related sector saw 45 deals in 2018, while manufacturing companies saw 38 deals collectively valued at $5.3 billion. The Energy & Environmental sector received the largest share of overall dollar values, with 24 deals collectively bringing in $12.2 billion. Add-on acquisitions grew to 34% of dealmaking, up from 20% just five years ago, with 116 deals in the year.

Canadian Fund Performance

The performance of Canadian buyout, private equity energy, and subordinated capital funds continued to show slight underperformance to public market comparators through to the first nine months of 2018. Published data provided by Cambridge Associates shows Canadian buyout, private equity energy, and subordinated capital funds with vintage years of 2000 or greater returning a since inception IRR of 5.7% as of the end of Q3. This lags far behind their US counterparts which showed consistent outperformance of public markets and a since inception IRR of 13.0%.

3 Canadian Private Equity Buyout Market Activity: Full Year 2018

Canadian Market Trends by Region

Ontario saw a total of 126 deals in 2018, or 37% of the national total, the highest provincial share since 2007. As recently as 2013, Ontario-based companies comprised only 26% of dealmaking. Québec placed right behind with 125 deals, or a 36% share of the national total. Among Canada’s major urban regions, Calgary saw the most impressive growth in dollars invested in 2018, with $7.1 billion, up from $1.9 billion last year. Vancouver, also showing well, saw $5.5 billion in PE investment in 2018, up from $1.4 billion the year prior.

Canadian Investor Activity in Global Markets

Canadian buyout and related PE funds participated in 162 non-Canadian deals during 2018, collectively valued at $121 billion, both all-time annual highs. Top deals in non-Canadian companies during the year included CPPIB’s investment in Blackstone’s $21.7 billion acquisition of Refinitiv, Brookfield Asset Management’s $18.9 billion takeover of Chicago-based U.S. mall owner GGP (subsequently renamed Brookfield Property REIT), Chinese online payment platform Ant Financial’s $600 million investment from the Canada Pension Plan Investment Board as part of an $18.2 billion deal, and Johnson Controls Power Solutions’ acquisition by Brookfield Business Partners and la Caisse de dépôt et placement du Québec for $17.5 billion.

Trends in Canadian buyout-PE fundraising

Leading Canadian fundraising in 2018 was Brookfield Capital Partners, which announced it closed its $8.6 billion Fund V in October. Other highlights included Waterous Energy Fund, which closed its initial fund in the second quarter at $1.4 billion and will invest in distressed oil & gas companies; and Brookfield Asset Management, which had the final close of its Infrastructure Debt Fund in the beginning of the year at $1.1 billion. An additional $2.8 billion was raised by Northleaf Capital Partners, to be split between their Private Equity Investors VII and Secondary Partners II funds. Collectively, Canadian buyout funds raised $17.1 billion during the year.

4 Historical Investment in Canadian Companies: Private Equity Buyout Deal Values Canadian companies saw deal values of $37.2 billion in 2018, up 31% from last year and the strongest full year on record. Deal values in Q4 were $12.6 billion, the strongest individual quarter since Q4 2014.

$40 $37.2

$35 $33.7

$31.8

$30 $28.4

$25 $24.2

$20 $18.6 $17.7 $15.9 $15 $12.8 $12.8 $11.8 $10.9 $10.5 $10 $10.0 $7.9 PE Deal Values ($ Billions) ($ Values Deal PE $6.2 $6.0 $5.3 $5 $3.4

$0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 Q2 Q3 Q4

5 Historical Investment in Canadian Companies: Private Equity Buyout Deal Volumes A total of 345 buyout and related private equity deals were completed in 2018. Despite record-breaking deal values, these volumes are down 10% from the previous year and are the second lowest since 2011.

500 466 457 450

400 385

356 349 345 350 333 318 300 288

248 249 250 242

200 199 193 195 191

150 142 140

# of PE Buyout Deals Buyout PE of # 125 100

50

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 Q2 Q3 Q4

6 Canadian PE-Buyout Investment, Top Five Urban Regions Calgary saw 7 oil & gas deals over $100 million; Ottawa led by $2.7 billion LBO of Mitel Networks. Montréal and Toronto saw their shares of Canadian PE decline, despite a record-setting year for Canada overall.

Toronto $2.7

$6.0 $3.3 Calgary $11.1

2017 Vancouver 2018 $23.8 Billion $29.8 Billion $1.4 $14.4 $5.5 Montreal $1.9

Ottawa $7.1

7 PE-Buyout Dealmaking: Deal Volume by Company Province Ontario saw 126 investments, or a 37% share of all deals in 2018, the province’s greatest share since 2007. Western Canada & Quebec deal volume shares held steady.

100% 4% 5% 4% 5% 5% 8% 8% 90% 12% 10% 11% 11% 13% 13% 80% 12% 17% 16% 17% 12%

70%

60%

43% 36% 50% 38% 34% 40% 42%

% Deals of % 40%

30%

20% 37% 32% 32% 33% 26% 26% 10%

0% 2013 2014 2015 2016 2017 2018 Ontario Québec Alberta British Columbia Rest of Canada

8 PE-Buyout Dealmaking: Deal Volumes by Transaction Type Control Stake transactions increasingly infrequent, comprised only 15% of all deals in 2018. Add-on acquisitions grew to 34% of dealmaking, up from 20% just five years ago, with 116 deals in 2018.

100% 4% 2% 4% 5% 4% 5% 90% 17% 19% 14% 14% 20% 17%

80% 7% 11% 9% 5% 11% 7%

70%

60% 20% 22% 29% 32% 27% 34% 50%

% Deals of % 40% 25% 28% 22% 30% 27% 27% 22% 20%

10% 23% 20% 20% 17% 15% 15% 0% 2013 2014 2015 2016 2017 2018 Control Stake Minority Stake Acquisition for Expansion Mezzanine PIPE Other

9 PE-Buyout Dealmaking: Deal Volumes by Investor Location Canadian investors participated in 74% of all Canadian PE buyout deals in 2018, down from an 81% participation rate just four years ago. Participation from United States investors came to 28% of all deals in 2018, up from 18% of deals in 2013.

100%

90%

80%

70%

60%

50%

% Deals of % 40%

30%

20%

10%

0% 2013 2014 2015 2016 2017 2018 Deals Including Canadian Investors Deals Including United States Investors

10 PE-Buyout Dealmaking Versus All M&A of Canadian Targets While Canadian buyout deal volumes were down 10% year-over-year, Canadian M&A deal volumes declined by 15%, resulting in PE deals’ share of traditional M&A remaining flat at 14% throughout 2018.

500 35%

450 30% 400

350 25%

300 20% 250

15%

# of Deals of # 200

150 10%

100 5% 50

0 0% 2013 2014 2015 2016 2017 2018 # of PE Deals PE Deals as % of all M&A Activity

11 Top Canadian Private Equity Deals, Full Year 2018

Portfolio Company Investors Deal Value Rank Company Name Location Sector Investing Firms (Disclosed) ($ Millions) Husky Injection Molding 1 $4,959.6 Bolton, ON Plastics Manufacturing Platinum Equity Systems Enbridge - Canadian Natural 2 $4,310.0 Calgary, AB Natural Gas Brookfield Asset Management Gas G&P Business 3 Enercare $4,300.0 Markham, ON Energy Solutions Brookfield Asset Management Pure Industrial Real Estate 4 $3,800.0 Vancouver, BC Industrial Properties REIT Blackstone Group, Ivanhoe Cambridge Trust GFL Environmental 5 $3,721.9 Toronto, ON Waste Management Ontario Teachers' Pension Plan, BC Partners (Waste Industries acquisition)

6 Mitel Networks $2,658.6 Ottawa, ON Telecommunications Partners GFL Environmental 7 $2,027.6 Toronto, ON Waste Management Ontario Teachers' Pension Plan, BC Partners (Recapitalization)

8 Wolf Midstream $1,610.0 Calgary, AB Energy Infrastructure Canada Pension Plan Investment Board

9 Innergex Renewable Energy $1,100.0 Longueuil, QC Renewable Energy Caisse de dépôt et placement du Québec

British Columbia Investment Management Corp, Caisse de dépôt et 10 Stella-Jones $876.5 Saint-Laurent, QC Wood Products placement du Québec, Fonds de Solidarité FTQ, GPI Capital, Ontario Municipal Employees Retirement System

12 Canadian PE-Buyout Investment by Deal Size Range The top three deals of the year; Husky Injection Molding Systems, Enbridge’s Canadian natural gas gathering and processing business, and Enercare, accounted for $13.6 billion, or 36% of total 2018 deal values.

$2,058 9 3 22 $4,473

>= $1 Billion 61 $1,927 $500 - $999 Million $37.2 Billion $100 - $499 Million 345 Deals Invested 186 $10 - $99 Million

< $10 Million 64 $28,488 Deal Values Undisclosed

13 Canadian PE-Buyout Investment by Sector, Full Year 2018 Companies within the IT & Media sector comprised 16% of all deals recorded during the period. Energy & Environmental companies captured the largest share of deal values with $12.2 billion, or 33%.

Full Year 2018 Total # of Deals Full Year 2018 Total Deal Values ($ Billions) 60 $14

50 $12

$10 40 $8 30 $6 20 $4

10 $2

0 $0

IT & Media Consumer Related Manufacturing Business Services Construction & Engineering Oil & Gas Mining & Minerals Energy & Environmental Healthcare & Life Sciences Finance Transportation Forestry & Agriculture

14 PE Investments by Canadian Firms in non-Canadian Companies Canadian funds invested in 162 deals involving non-Canadian companies throughout 2018, with collective deal values of $121 billion, both all-time highs.

$50 60

$45 50

Thousands $40

$35 40

$30

$25 30

$20 Deals of # 20

$15 Deal Values ($ Billions) ($ Values Deal $10 10 $5

$0 0 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Total Deal Values, Canadian & Non-Canadian Investors # of Deals

15 Top PE Investments by Canadian Firms in Non-Canadian Companies, 2018

Portfolio Company Canadian Investors

Deal Value Rank Company Name Location Sector Investing Firms (Disclosed) ($ Billions) , United Refinitiv $21.7 Financial Services Canada Pension Plan Investment Board 1 Kingdom

2 Brookfield Property REIT $18.9 Chicago, IL Real Estate Brookfield Asset Management

3 Ant Financial $18.2 Hangzhou, China Financial Services Canada Pension Plan Investment Board

Brookfield Business Partners, Caisse de dépôt et 4 Johnson Controls Power Solutions $17.5 Milwaukee, WI Auto Batteries placement du Québec

5 Calpine Corp. $7.2 Houston, TX Power Generation Canada Pension Plan Investment Board

Ontario Teachers’ Pension Plan, Caisse de dépôt et 6 Techem $7.0 Eschborn, Germany Energy Metering placement du Québec

7 Recordati $4.7 , Italy Pharmaceuticals PSP Investments

8 VeriFone $4.4 San Jose, CA Financial Services British Columbia Investment Management Corporation Rotterdam, Refresco Group $2.5 Soft Drinks British Columbia Investment Management Corporation 9 Netherlands 10 Bridgetex Pipeline Company $1.8 Dallas, TX Oil & Gas OMERS Infrastructure

16 PE-Buyout Fundraising by Canadian Firms Fourth quarter fundraising was led by Brookfield Capital Partners, which announced it closed its $8.6 billion Fund V in October.

$50 $45.4

$45

$40

$35

$30

$25

$19.8 $20 $17.1 $16.1 $14.7 $15 $12.2

Funds Raised ($ Billions) ($ Raised Funds $11.1 $10 $7.3

$5 $3.8

$0 2010 2011 2012 2013 2014 2015 2016 2017 2018

17 Canadian PE-Backed Exits, Full Year 2018 A total of 66 exits were completed in 2018, resulting in exit volumes down 11% from the prior year. The fourth quarter saw 16 trade sale exits occur, the highest level since Q2 of 2017.

Portfolio Company Investors

Deal Value Rank Company Name Location Sector Exiting Investors (Disclosed) ($ Billions) Plastics 1 Husky Injection Molding Systems $5.0 Bolton, ON OMERS Private Equity, Manufacturing

Atrium Innovations Advisers , Caisse de dépôt et placement du 2 $2.9 Westmount, QC Nutritional Products Québec, Fonds de solidarité FTQ

3 Mitel Networks $2.6 Kanata, ON Telecommunications Francisco Partners

GFL Environmental HPS Investment Partners, Macquarie Infrastructure 4 $2.0 Toronto, ON Waste Management Partners, Hawthorn Equity Partners Camso Desjardins Capital, Caisse de dépôt et placement du 5 $1.8 Magog, QC Tire Manufacturing Québec, Fonds de solidarité FTQ

30

20

# of Exits of # 10

0 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 M&A Public Secondary Sale

18 Cambridge Associates: Buyout & Other Private Equity Fund Performance Canadian private independent funds holding positive returns but underperforming compared to public markets, while U.S. funds outperform.

14% 14%

13.0% 12% 12%

10% 10%

8% 8%

6% 6% 5.7%

4% 4%

2% 2% Q3 2014 Q3 2015 Q3 2016 Q3 2017 Q3 2018 Q3 2014 Q3 2015 Q3 2016 Q3 2017 Q3 2018 Canadian Buyout, Private Equity Energy & Subordinated Capital Funds U.S. Buyout, Private Equity Energy, Subordinated Capital Funds mPME: S&P/TSX 60 Index mPME S&P 500 Index

Source: Cambridge Associates 19 Explanatory Notes

1. Data collected and analyzed by Refinitiv for this statistical report were drawn from a variety of sources including Refinitiv M&A databases, regulatory filings, press releases, and proprietary reports from Canadian and non- resident firms, private equity firms, law firms, and other service providers.

2. Key statistical indicators (e.g., total disbursements, per quarter or per annum) are influenced by the fact that a substantial fraction of buyout and other PE deals are not fully disclosed. For instance, “dollars invested” in a given period pertain only to those deals with values that have been published or confidentially disclosed to Refinitiv.

3. The data also highlight the deal-making of Canadian funds in non-Canadian companies. “Dollars invested” pertain to the total value of disclosed deals in which Canadian funds have participated and not the specific Canadian financial contributions to these deals. Deals are first tracked as of announcement date, then tracked as of completion date upon closing.

4. Statistical data reflect all essential forms of buyout-PE deal-making, including control-stake acquisitions of businesses, minority equity investments, restructuring and special-situations transactions, mezzanine deals over $3 million, acquisitions for expansion and other quasi-equity investments.

5. Fund performance data and public market equivalents are produced via the Cambridge Associates Benchmark Calculator, available through Thomson Reuters Eikon. Returns are for Canadian and US buyout, private equity energy and subordinated capital funds with vintage years of 2000 or greater, on a first cash flow basis, in Canadian dollars, from inception to the end of the indicated quarter, under published data mode Q3 2018. Pooled internal rates of return are net of fees, expenses and carried interest. CA Modified Public Market Equivalent (mPME) replicates private investment performance under public market conditions. The public index’s shares are purchased and sold according to the private fund cash flow schedule, with distributions calculated in the same proportion as the private fund, and mPME NAV is a function of mPME cash flows and public index returns.

6. All current and previous years data is as of Thursday, January 24th, 2019. Data is continuously updated and is therefore subject to change. All figures are in Canadian dollars unless otherwise noted.

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