Everything You Need to Know About the Fast Valuation Growth in Well-Capitalized Canadian Markets

Private sector valuations have grown steadily in Canada for the last five years. Numerous private companies survived and prospered during the pandemic.

FREMONT, CA: The strong equity and debt market combination have led to healthy growth in the Canadian private equity market.

Canadian PE funds have also raised larger pools of capital due to low-interest rates and support from major Canadian lenders. As valuations rise, asset owners are more likely to consider selling, creating a recipe for meaningful market activity and high valuations.

Canada's private market expansion has led to an upward trend in valuations in almost all sectors over the last five years.

According to the third quarter of 2021, Consumer Products and Services (B2C), Financial Services (FIS), and Information and Communications Technology (ICT) had the highest values, with CAD$59.48M, CAD$62.74M, and CAD$44.2M, respectively. 

Only the technology industry has experienced continuous growth in median valuation over the last five years, reflecting a global technology boom.

For several years, Canada has invested heavily in information and digital technologies. The Bank of Canada reported that by 2019, economic activity in the digital sector would account for almost the same share of Canadian economic activity as mining, oil, and gas combined.

The ICT sector has steadily gained market share in Canada's VC market since 2017. According to the third quarter of this year, the total valuations of all VC-backed tech companies reached over CAD$38B, accounting for 66 percent of all VC valuations.

Tech valuations are breaking records and posing challenges. Inflows of capital indicate that investors recognize the industry's appeal. It is also a market favored by entrepreneurs for fundraising due to the competition among investors. Inflated valuations also make it difficult for entrepreneurs to execute and live up to the valuations at which they raise money.

Canada has fewer private companies than the United States, China, the United Kingdom, or Israel. A median CAD$ 31.14M valuation was reached by Canadian companies, which narrowed the gap to about half of the U.S. valuation during the post-pandemic period. Investing experts believe that, in the short term, the same growth can be expected in the Canadian private market due to already existing ingredients for growth.