Monday Market Minute | Jan 16, 2023

Canadian PE firms sit on record dry powder as deal flow thaws

What Moved

CVCA data showed Canadian private equity sponsors entered 2023 holding record levels of undeployed capital after deal activity dropped sharply in H2 2022. The bid-ask spread between buyers and sellers had been the primary friction — vendors anchored to 2021 valuations while buyers priced in the new rate reality. Early signs suggested that gap was narrowing as sellers accepted that the era of 15x+ multiples had ended.

Why It Matters

The dry powder overhang created a two-sided pressure: LPs expected deployment, while GPs needed to underwrite deals at returns that justified a 5% risk-free rate. This dynamic favoured disciplined mid-market operators over mega-fund generalists. Canadian mid-market PE — businesses with $5M–$25M EBITDA — offered a valuation discount relative to U.S. comparables, making it a hunting ground for the patient.

Signal to Watch

Q1 deal announcements from major Canadian sponsors like Onex, Brookfield Private Equity, and OMERS Private Equity would signal whether the deployment logjam was genuinely breaking.

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