A Look at the Private Equity Sector in Canada

This article first appeared on Hunt Scanlon Media

Like in many other regions, the private equity sector in Canada is expressing a mixed forecast for the rest of this year. While some firms are experiencing healthy fund raising and deal activity, others are curtailing targets and managing LP liquidity concerns, given the 20-year low in equity financings to date in 2023, according to Bill Vlaad, CEO and managing partner of Toronto-based Vlaad and Company. “Many PE firms operating in Canada have diversified their offerings in recent years to include investment opportunities beyond our domestic border, investing into geographies and sectors appealing to a larger LP pool. Additionally, the relative size of the average Canadian PE fund keeps it out of direct competition from many global players and in writing smaller cheques allows for a nimbler GP then many larger shops.”

Vlaad and Company’s activity in direct investment/PE recruiting has evolved over the years. The firm started with a focus on investment bankers which evolved to include investment professionals within private equity firms. “Our success in hiring internally for our PE clients led us to partnerships for C-suite professionals within their portfolio companies,” said Mr. Vlaad. “Our understanding of the GPs investment style, philosophy and culture meant we held valuable institutional knowledge usable to find C-Suite hires whom would work well with the PE firm’s operating style.”

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When looking to invest Mr. Vlaad explains that if there is a good business case, PE firms are interested. “The recruitment industry ticks a lot of boxes for private equity firms,” he said. “The highly fragmented industry boasts high margins, a diverse and dedicated client base, with a scalable product offering. In theory, the appetite should be there for private equity investment.”

Mr. Vlaad also notes that what recruitment firm owners need to answer for a possible PE investor is: “How do you manage the introduction of new technologies, how repeatable is past success, and how can financial or operational leverage be applied to increase cash flow from the business.” Unfortunately, he says that many firms miss out on PE opportunities because they fail to see value from the prospective of the buyer.

“While the forecasted recruitment numbers are softening for the remainder of the year, this is coming off two extremely good and arguably unsustainable years,” Mr. Vlaad said. “We believe recruitment for the remainder of 2023 and into 2024 will reflect reasonable growth rates conducive of a well-supported market with active managers constantly screening their teams to ensure top-level performance.”