Private Equity in Canada

If we look at the update for 2016, we would see that the Canadian private equity market didn’t do well in 2016. In 2016, the Private equity market in Canada contracted by 24% in value, and the number of transactions got reduced by 19%.

However, 2015 was not at all bad. In 2015, PE deals shot up to $49 billion in value; but in 2016, it was just $31 billion in value.

But the question remains why did Private Equity in Canada was hit hard in 2016?

As we investigate, we see that the energy sector in 2016 didn’t perform as expected. In 2016, only 18 deals closed in the energy sector, which was $3.1 billion. If we contrast with the energy deals in 2015, we would see that there were 36 transactions and the value of those deals was $7.1 billion.

According to Financial Post, in 2016, three private equity investors – Hellman & Friedman LLC, PennanrPark Investment Corporation, and Thomas H Lee Partners LP topped the list, closing three deals.

It was also found that the first three quarters were very fruitful in terms of the deal closing, but in the last quarter, the private equity market in Canada couldn’t live up to the expectation.

As a job seeker, how should you approach Private Equity in Canada? It would be best if you saw it as the inevitability of the market's typical characteristics. Sometimes the market will go up, and sometimes the market will go down. And even if it hits the market badly, the consequences only last for a few months; after closing a few more deals, things will start to look brighter than ever.

If you are new to Private Equity, you may have a look at this detailed Private Equity Overview.

Canada follows the same footprints as the USA private equity market and offers countless services. But before that, it's essential to mention the types of fund support offered by top Private Equity firms in Canada. Canada's top private equity firms have a world-class operational infrastructure that supports different sorts of funds.

They are –

• Sustainability
• Buy-out
• Life Science
• Communications
• Turn-around
• Secondary funds
• Mezzanine

Top Private equity firms in Canada provide all of these fund types and offer specialized support to every sort of need of their customers.

Now, let’s talk about services.

• Funds establishment & structuring: Only providing funds to the companies wouldn’t suffice until the top private equity firms help companies with the established method and mention how to structure them.
• Fund accounting: Along with fund establishment & structuring, private equity firms also provide fund accounting to the respective firms to ease the process.
• Global private equity technology services: PE is not a regional phenomenon, and it has been spreading its wings globally. And to offer a grip to the companies, top private equity firms offer a worldwide perspective through global private equity technology services.
• Fund administrative services: Providing funds is not the only thing Private equity firms do in Canada. They offer many other ancillary services as well. One of the most important ancillary services is fund administrative service, which private equity firms in Canada offer to the respective companies to help them take the leap from point A to point B.
• Transferring agency & corporate secretarial services: Though Private Equity in Canada mainly handles the different sizes of deals, they also offer transferring agency & corporate secretarial services to companies directly connected with PE firms.
• Complimentary services: Other than the above, top private equity firms in Canada also offer various complementary services like global custody, cash management, foreign exchange, and securities lending.

Providing all these services to the respective private companies ensures that the companies make a swift transition from where they were to where they want to be. And these services are applicable for all sorts of funds (small and big) at all levels.

Leaders League came up with a list of top private equity investors (based on Leveraged Buy Out) in Canada in 2016. The rankings were based on the foundation of the most preferred Private Equity in Canada in LBO – leading private equity firms, excellent PE firms, and highly recommended private equity organizations.

Let’s have a look at them one by one.

Leading: Leaders League had mentioned four names under the leading private equity firms in Canada in 2016, which didn’t match the Financial Post report. Let’s have a look at them –

• Birch Hill Equity Partners
• Crestview Partners
• Hellman & Friedman
• TPG Capital

Excellent: These firms are not the most influential in 2016, according to Leaders League, but there are holding the second rung in terms of preference in the market –

• Abacus Private Equity Group
• Caisse DE Depot ET Placement DU Quebec
• Citic Capital Partners
• CPP Investment Board
• Novacap Investments
• ONEX Partners
• Teachers’ Private Capital

Highly recommended: After leading excellent Private Equity firms in Canada in 2016, here’s a list of firms that the Leaders League highly recommended –

• ARC Financial
• Centerbridge Partners
• CI Capital Partners
• Edgestone Capital Partners
• Fonds DE Solidarite
• Fosun Capital Group
• Serruya Private Equity
• Westerkirk Capital

Let’s say that you have just graduated from college, and you are rearing up the idea that private equity would be your first job. How would you approach the whole recruiting process?

In this section, we will talk about the recruiting process in private equity in Canada and most North American countries.

Let’s look at the process step by step –

Timeline

The timeline in the recruiting process is the most important thing to keep in mind. Here’s a brief overview –

1. On-cycle interview session: From late January to March, the on-cycle interview session starts. The schedule isn’t always set, but the time frame is always from January to March.
2. Off-cycle interview session: After March, the off-cycle interview session starts, and it goes for a long time.

How the recruitment process starts (in PE firms in Canada):

As you already know, entering into Private Equity in Canada isn’t easy. You won’t be able to apply through online portals, and there is no means for online applications. The alternative is that the head-hunters will reach you for any open positions at private equity firms. Each private equity firm hires a head-hunter to execute the whole recruitment process. Once the whole process is done and a new hire joins the private equity firm, the head-hunter will be paid a fee based on the pre-determined percentage of the new hire's salary. So, your success in getting hired is dependent on the head-hunter. If the head-hunter doesn't recommend you to be an excellent candidate for hire, your chance of getting into Private Equity in Canada is almost bleak.

First Screening

So how would you make an impact? The answer is you need to think from the head-hunter’s perspective. Whenever you are called for the first interview, it is a screening method. This primary interview will filter the best candidates from a series of candidates. And that means the head-hunter will judge your every move, even if s/he would be pretty nice on the surface. The PE firm is the client of the head-hunter, not you. And if the head-hunter fails to deliver the best/ high-caliber candidates, then the client's precious time would be wasted, and the head-hunter risks being replaced with another head-hunter. So, s/he will only recommend you if you’re the best candidate of the lot (in knowledge, skill, willingness, and attitude). So, before the first screening, you need to prepare hard. Preparation is the key to impacting the head-hunter and ensuring that you get selected for the next round.

On-cycle interviews

After the screening, the on-cycle interviews are conducted in January-March. And typically, the offer is extended within a short weekend in the case of mega-funds. PE interviews wouldn’t be like investment banking. Big Private Equity in Canada makes quick decisions, and they select the most suitable candidates within 3-4 days of the interviewing process. So, the idea is you need to be always ready for the interview. If they ask you to come to an interview at 2 a.m., you should be ready to go for the interview. Also, have a look at this Top Private Equity Interview Q&A

Off-cycle interviews:

Off-cycle interviews are conducted for an extended period, usually after March. Generally, the interview process will take longer than the on-cycle interview session. You will be interviewed, and if you do well, you will be informed within a short period; but the offers will take more time.

Format:

There are usually three rounds for both on-cycle and off-cycle interviews. First, there would be a first-round interview, then a case study analysis or a financial modeling skills test. Finally, there would be the final round with Partners of the Private Equity firms in Canada.

Exception:

After mentioning the whole thing, it’s important to mention that the recruiting process in Canada is not always structured (especially for pension funds). Along with getting hired by the head-hunters, people with experience also get hired by references or recommendations.

The work culture in Canada is a bit different than in the USA. As Canada has a relatively small market in private equity than the USA, there are fewer mega-funds, and most are small and in-between funds that private equity firms handle.

The working hours are around 70-100 hours a week, depending on which firm you work in and the size of funds you handle. As a result, the work-life balance can't always be maintained.

However, if you stick around for 2-4 years in private equity in Canada, you will move on to a higher rung where you will usually work less hours than your juniors.

The salary in private equity is huge, as you already know. In Canada, there's a simple structure followed by big private equity firms. The below-mentioned salary is for first-year private equity professionals, and as you move on to a higher rung, your salary will increase gradually –

• If you are in the Canadian private equity market and join the pension funds, you would earn around $150,000 per annum.
• Can you see the difference between joining a pension fund and a mid-cap fund? Yes, the difference is $50,000 per annum in salaries. If you are at the beginning stage of your private equity career and join a mid-cap private equity firm, your salary would be around $200,000 per annum.
• Lastly, if you join Onex, your salary would be more than $250,000 per annum.

So, from the above information, it's clear that depending on the private equity funds you decide to join in, your salary would greatly be affected. Moreover, it would be best to keep in mind that your salary is also directly proportionate to your hours. And the working hours are highly dependent on the funds.

Before you ever decide to exit private equity in Canada, first be clear about why you would like to exit in the first place? Do you worry about the working hours? Or you’re not happy with the salary? If salary is your thing, you can look at top-notch firms like Onex, Birch Hill, Brookfield, and Imperial, which play havoc in terms of salaries.

And if you're worried about working hours, you can still stick to private equity for some time and get promoted to higher positions.

Because in Canada, it’s challenging to go to other fields from private equity! It’s relatively easy to come into private equity from an investment banking background but not easy to move out to something else.

However, with enough networking and cold calling, you can land interviews in investment banking and hedge funds if you aim.

In Canada, the private equity market is always not stable. But few top-notch firms which execute major deals are usually unaffected. So from the beginning, try joining the big firms if you want to stay in Canada. Otherwise, you can always move out and join the USA private equity market. The only requirement, in that case, would be a top-notch degree from a reputed university in the USA.

This article has been a guide to Private Equity in Canada, their services offered, the recruitment process, culture, top private equity firms in Canada, salaries, and exit opportunities. You may also look at the following article to learn more about Private Equity.

• Private Equity in France
• Overview of Private Equity in Russia
• Private Equity in India
• Private Equity in Brazil