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The state of private equity

May 31, 2023

Authored by RSM Canada LLP

Edwin P. Reilly, CPA, CA shared this article

ARTICLE | May 31, 2023

Diana Dunlop is a partner and the transaction advisory services leader for RSM Canada. She is also RSM Canada's private equity leader and has deep insight into the global private equity industry. She shared those insights in a recent conversation.

How has the year started for the Canadian private equity industry?

We are coming off a sustained period of strength that began during the COVID-19 pandemic and continued during the recovery. It was very busy, with accelerated growth and a high level of deals during 2021 through 2022. But late last year, deal levels tapered off. While we still see a lot of growth because Canadian private equity funds continue to look for opportunities across the Canadian market and internationally, those deals aren't being reached as quickly or as frequently.

How about the middle market in private equity?

The number of deals has tapered off compared to pre-pandemic numbers. With higher interest rates and the potential for a recession, we are seeing a bit of hesitation in the market right now. Deals are taking longer because of negotiations around the right valuation for both parties. Despite this, private equity funds are looking for opportunities and there is still a healthy amount of dry powder in the market.

Are there areas of weakness?

With the risk of a recession and rising interest rates, a lot of technology, media and telecom (TMT) companies that relied on low-cost financing are very likely looking to be bought or wanting to transact for additional capital to focus on growth. It's a reflection of the economic times and the pressures they are feeling.

What kind of pressures are these TMT companies feeling?

Capital funding has become more difficult with higher interest rates. So early-stage TMT companies, which relied on inexpensive financing to fuel their growth, have become more susceptible to a potential economic downturn. This has caused them to cut costs and extend their run rates for as long as possible. So while activity in TMT may be enhanced, it's not because of growth.

Are there areas of strength?

Stable industries in which you will see deal flow and capital invested include infrastructure, industrials and manufacturing, all of which have had a relatively active start to 2023.

What's different compared to a year ago?

The easy money is gone. Companies that relied on it are struggling in terms of transactions and financing. We're probably going to see a lot more pressure in the market.

What do you see happening for the rest of the year?

While there is still healthy activity in Canadian private equity, some areas are going to be affected more than others. For example, retail and consumer goods could feel the effects of a downturn. But new, innovative industries like energy, renewables and those focused on sustainability are going to see new growth.

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This article was written by Diana Dunlop and originally appeared on May 31, 2023 RSM Canada, and is available online at

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