Canadian VC Market Shows Signs of Revovery

(Reuters) – Investment in venture capital jumped 57 percent in Canada in the second quarter, the first substantial increase in funds allocated to the struggling sector in over two years.

According to data compiled by the Canadian Venture Capital and Private Equity Association (CVCA) and Thomson Reuters, $334 million was invested in the quarter, up from $213 million a year earlier.

Canada’s private equity buyout industry, which invests in established private or publicly listed firms, showed more life than the venture capital sector.

“The first half of the year has been marked by an increase in the activity of Canadian investors,” CVCA said in a statement.

The association said there were 54 completed and pending buyout, or private equity, transactions in Canada in the first half of 2010, 23 of which had disclosed values totaling $1.71 billion.

Those figure compare with 52 transactions in the first half of 2009, 26 of which had disclosed values of $0.9 billion.

Buyout fund-raising was steady, with $346 million raised in the first half of the year by four funds, nearly double the $176 million raised by two funds in the first half of 2009.

So-called “exits,” where investors exit from investments through a sale to another company or by going public, showed strength in mergers and acquisitions but relative weakness in initial public offerings.

CVCA said 21 Canadian companies were acquired for an average disclosed deal size of $116 million in the first half of the year.

“Canadian companies are on pace for 42 M&A exits this year, exceeding the 24 M&A exits which occurred in each of 2008 and 2009,” CVCA said.

It said initial public offerings continued to lag, with no venture capital-backed companies going public in the first half of the year. ($1=$1.036 Canadian) (Reporting by Pav Jordan; editing by John Wallace)