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Private Equity in Canada

Article bySayantan Mukhopadhyay
Reviewed byDheeraj Vaidya, CFA, FRM

Private Equity in Canada

If you would like to know everything about private equity in Canada, you are in the right place. In this article, we will talk about the private equity market, salaries, recruitment process, culture, top firms, jobs, and exit opportunities in Canada.

Let’s look at the sequence of the article –

Overview of Private Equity in Canada

If we look at the update of 2016, we would see that the Canadian private equity market didn’t do well in 2016. In 2016, the Private equity market in Canada got 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 still remains why 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; the total value of 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, each 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? You need to see it as the inevitability of the market’s usual characteristics. Sometimes the market will go up, and sometimes the market will go down. And even if it hit the market badly, the consequences only last for a few months; and again, 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.

Private Equity Services Offered in Canada

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

They are –

  • Sustainability
  • Buy-out
  • Life Science
  • Communications
  • Turn-around
  • Secondary funds
  • Mezzanine
Private Equity in Canada

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Source: Private Equity in Canada (wallstreetmojo.com)

Top Private equity firmsTop Private Equity FirmsPrivate equity firms are investment managers who invest in many corporations' private equities using various strategies such as leveraged buyouts, growth capital, and venture capital. The top private equity firms include Apollo Global Management LLC, Blackstone Group LP, Carlyle Group, and KKR & Company LP.read more in Canada provide all of these fund types and offer specialized support to each and every sort of need to its customers.

Now, let’s talk about services.

The purpose of providing all these services to the respective private companies is to ensure that the companies make a swift transition between 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.

Top Private Equity firms in Canada

Leaders League has come up with a list of top private equity investors (on the basis of Leveraged Buy OutLeveraged Buy OutLBO (Leveraged Buyout) analysis helps in determining the maximum value that a financial buyer could pay for the target company and the amount of debt that needs to be raised along with financial considerations like the present and future free cash flows of the target company, equity investors required hurdle rates and interest rates, financing structure and banking agreements that lenders require.read more) in Canada in 2016. The rankings had been done on the foundation of 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 with the report given by Financial Post. 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 and excellent Private Equity firms in Canada in 2016, here’s a list of firms which were highly recommended by Leaders League –

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

Private Equity Recruitment in Canada

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 not only Canada but in most of the 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: During 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 salary of the new hire. 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 the 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 method of screening. 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 precious time of the client 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 make an impact on the head-hunter and to ensure that you get selected for the next round.

On-cycle interviews

After the screening, the on-cycle interviews are conducted during 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 best and 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 of time, usually after March. Generally, the interview process will take longer than the on-cycle interview session. You will be interviewed, and if you do good, you will be informed within a short period of time; 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 skillsFinancial Modeling SkillsFinancial modeling refers to the use of excel-based models to reflect a company's projected financial performance. Such models represent the financial situation by taking into account risks and future assumptions, which are critical for making significant decisions in the future, such as raising capital or valuing a business, and interpreting their impact.read more test, and 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.

Private Equity Culture in Canada

The work culture in Canada is a bit different than 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 always can’t 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 work usually lesser hours than your juniors.

Salaries in Private Equity in Canada

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

  • If you are in the Canadian private equity market and you join the pension funds, you would earn around $150,000 per annum.
  • If you are at the beginning stage of your private equity career and join a mid-cap private equity firm, then your salary would be around $200,000 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.
  • Lastly, if you join at 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 by that. Moreover, you also need to keep in mind that your salary is also directly proportionate with the hours you put in. And the working hours are highly dependent on the funds.

Private Equity Exit Opportunities in Canada

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, then you can stick to private equity still 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 up interviews in investment banking, hedge fundsHedge FundsA hedge fund is an aggressively invested portfolio made through pooling of various investors and institutional investor’s fund. It supports various assets providing high returns in exchange for higher risk through multiple risk management and hedging techniques.read more, if that’s what you aim for.

In the final analysis

In Canada, the private equity market is always not stable. But few top-notch firms which execute major deals are usually unaffected. So since 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.

Recommended Articles

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

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