Chris Wattie, Reuters Canadian Private Equity Buyout Review First Half 2018 Table of Contents Canada’s PE Buyout Market in H1 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 Canadian Private Equity Buyout Market Activity: First Half 2018 Canadian Buyout-PE Market Trends The first half of 2018 within Canada’s buyout and related private equity market saw a total of 173 transactions collectively valued at $18.3 billion. Deal values reached a new all time high for the first half of the year, surpassing by 26% the previous highs of $14.5 billion set in both the first half of 2007 and the first half of 2017. Deal volumes saw a year-over-year decrease of 14%, resulting in an average disclosed deal value of $232 million. The March closing of the $5 billion secondary sale of Bolton, Ontario-based Husky Injection Moldings Systems, originally announced last December, by OMERS Private Equity and Berkshire Hathaway to US private equity firm Platinum Equity, has retained the number one spot in both Canada’s top deals list and top exits list. Other top deals during the quarter were the announced $3.8 billion acquisition of industrial properties portfolio operator Pure Industrial Real Estate Trust by Blackstone Group as well as Mitel Networks’ $2.6 billion sale to Searchlight Capital Partners. Although the number of PE deals during the first half dropped 14% from the previous year, Canadian private equity deals as a percentage of traditional M&A increased to 16.3% in the second quarter, a two-year high, though still far below the 30% share seen as recently as 2015. Canadian Market Trends by Sector The Information Technology & Media sector remained the most active in the first half, with 36 deals collectively valued at $3.3 billion. The consumer-related sector saw 21 deals in the first six months, while manufacturing companies saw 17 deals collectively valued at $5.0 billion. Canadian Fund Performance The performance of Canadian buyout, mezzanine, and private equity energy funds continued to show slight underperformance to public market comparators through to the end of the first quarter 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 5.3% as of the end of Q1. This lags far behind their US counterparts which showed consistent outperformance of public markets and a since inception IRR of 12.8%. Canadian Private Equity Buyout Market Activity: First Half 2018 Canadian Market Trends by Region Companies based in Québec received the largest share of investment volumes throughout the first half of 2018, with 39% of all financings. Ontario’s portion increased slightly from 33% of volumes over the course of 2017 to 36% during the first six months. British Columbia saw only 9% of all deals, showing declines from 2016 and 2017 when the province saw shares of 11% and 13% respectively. Canadian Investor Activity in Global Markets Canadian buyout and related PE funds participated in 70 non-Canadian deals during Q1 collectively valued at $84.2 billion. While this reflected an increase in deal volumes of 9% from the same period a year earlier, recorded deal values were collectively 2.5 times what they had been in the first half of 2017. This comes as a result of a number of mega deals occurring during the quarter. Thomson Reuters announced the sale of a 55% stake of its Financial & Risk business, Refinitiv, to a consortium led by Blackstone Group in a deal valued at $21.0 billion. Other investment partners involved in the deal included Canada Pension Plan Investment Board and Singapore sovereign wealth fund GIC. Ant Financial, a Chinese online payment platform, received $600 million from the Canada Pension Plan Investment Board as part of an $18.2 billion deal. Brookfield Asset Management also agreed to a takeover of Chicago-based U.S. mall owner GGP for a cash consideration of $11.9 billion. Trends in Canadian buyout-PE fundraising Leading Canadian fundraising in the first half was Waterous Energy Fund, which closed its initial fund in the second quarter at $1.4 billion and will invest in distressed oil & gas companies. The Canadian Business Growth Fund announced that it has raised $545 million to date and will invest in Canadian mid-market companies. Historical Private Equity - Buyout Investment in Canadian Companies: Deal Values Deal values reached $18.3 billion in the first half, the strongest first half on record, surpassing by 26% the $14.5 billion invested in the first half of both 2007 and 2017. $35.0 $30.0 $31.1 $28.2 $25.0 $24.2 $20.0 $17.7 $18.3 $15.0 $15.9 $12.8 $10.0 $11.8 $10.9 $10.5 Deal Values ($ Billions) ($ Values Deal $5.0 $6.0 $0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 Q2 Q3 Q4 Historical Private Equity - Buyout Investment in Canadian Companies: Deal Volumes Despite historical total deal values, only 173 deals were announced or completed in the first half, down 14% from 2017. 500 450 466 456 400 350 381 348 356 331 300 315 250 248 249 200 # of Deals of # 190 150 173 100 50 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 Q2 Q3 Q4 PE-Buyout Dealmaking: Deals by Company Location Ontario-based companies saw 62 deals in the first half, a 36% share of all Canadian activity. Ontario last had a greater first-half share in 1999, with 38% of Canadian dealmaking. 100% 90% 80% 70% 60% 50% 40% # of Deals of # 30% 20% 10% 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 H1 2018 Ontario Québec Alberta British Columbia Prairies Atlantic Canada Territories PE-Buyout Dealmaking: Deal Volumes by Transaction Type Add-on acquisitions comprised 35% of all deals in first half, a share that has grown each and every year since 2011, when acquisitions for expansion accounted for only 6% of deals. 100% 90% 80% 70% 60% 50% 40% # of Deals of # 30% 20% 10% 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 H1 2018 Control Stake Minority Stake Acquisition for Expansion Mezzanine PIPE Restructuring Other PE-Buyout Dealmaking: Deal Volumes by Investor Location Canadian Investors participated in 82% of Canadian PE buyout deals in the first half, increasing from a low of 77% in 2016. U.S. participation fell to 20% of deals in first half 2018, down from 25% in 2017. 100% 90% 80% 70% 60% 50% 40% % of Deals of % 30% 20% 10% 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 H1 2018 Deals Including Canadian Investors Deals Including United States Investors PE-Buyout Dealmaking Versus All M&A of Canadian Targets With Canadian M&A deal volumes down 16% quarter-over-quarter, and PE deal volumes up 11%, PE deals as a share of traditional M&A rose to 16.3%. 140 35% 120 30% 100 25% 80 20% 60 15% # of Deals of # 40 10% 20 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 # of PE Deals PE Deals as % of all M&A Activity Top Canadian Private Equity Deals, First Half 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 Pure Industrial Real Estate Industrial Properties 2 $3,800.0 Vancouver, BC Blackstone Group Trust REIT 3 Mitel Networks $2,566.6 Ottawa, ON Telecommunications Searchlight Capital Partners 4 Wolf Midstream $1,610.0 Calgary, AB Energy Infrastructure Canada Pension Plan Investment Board 5 Innergex Renewable Energy $1,100.0 Montreal, QC Renewable Energy Caisse de dépôt et placement du Québec 6 Dalradian Resources $537.0 Toronto, ON Mineral Exploration Orion Mine Finance Orion Resource Partners, Newcrest Mining Limited, 7 Lundin Gold $513.6 Vancouver, BC Gold Mining Lorito Holdings, Zebra Holdings and Investments Drummondville, 8 Napec $320.0 Energy Infrastructure Oaktree Capital Management QC 9 Transcontinental $287.5 Montreal, QC Print & Packaging Caisse de dépôt et placement du Québec 10 Anthem Properties Group $201.4 Vancouver, BC Property Management KingSett Capital Canadian PE-Buyout Investment by Deal Size Range Mega-deals drove investment in the first half of the year, with the top five accounting for 77% of overall disclosed deal values. 5 2 $956 11 $2,124 >= $1 Billion 27 $500 - $999 Million $1,051 $18.3 Billion $100 - $499 Million 173 Deals Invested 94 $10 - $99 Million < $10 Million 34 $14,036 Deal Values Undisclosed Canadian PE-Buyout Investment by Sector, First Half 2018 Companies within the IT & Media sector comprised 21% of all deals during the first half. Consumer-Related & Manufacturing companies followed with 12% and 10% respectively. First Half 2018 Total # of Deals First Half 2018 Total Deal Values ($ Billions) 40 $6.0 35 $5.0 30 $4.0 25 20 $3.0 15 $2.0 10 $1.0 5 0 $0.0 IT & Media Consumer Related Manufacturing Construction & Engineering Oil & Gas Business Services Energy & Environmental Mining & Minerals Finance Transportation Healthcare & Life Sciences Forestry & Agriculture PE Investments by Canadian Firms in non-Canadian Companies Canadian firms invested in 70 deals with non-Canadian companies in the first half, with deal values of $84.2 billion.