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U.S. mid-cap equity firms want slice of Canadian pie
PNC plans move
Published By: The National Post
Date: Monday, November 19, 2007
By: Karen Mazurkewich
Internet Link: Canada.com
Just follow the money: As more mid-market private equity
firms look north for business deals, U.S. financial services
companies such as Cincinnati-based PNC Business Credit are
also positioning themselves for a piece of the pie.
The company has plans to open an office in Toronto early
next year, according to Paul Schneider, chief operating
officer of PNC Business Credit.
PNC Business Credit 's move to establish a satellite office
in Canada comes as little surprise to industry players. Its
parent company, PNC Financial Services Group, also owns the
mergers and acquisitions advisory firm Harris Williams -- a
company that has stepped up its activity in Canada in the past
year.
PNC is not the first U.S. financial institution to create a
beach head in Canada. Bank of America, National City Bank,
Wells Fargo Financial Canada and Wachovia Capital Finance
Corp. have already set up offices in Canada to concentrate on
asset-based loans.
Their edge: These large U.S. financial institutions have
done more transactions and have more expertise in asset-based
loan transactions than their Canadian counterparts, says Josh
Gerstein of ZED Financial Partners.
Historically, these U.S. firms have made their mark dealing
with debt-distressed companies. Although more U.S. mid-market
firms are shopping around in Canada,"I wouldn't read
[PNC's] jump here as a sign of a strong U.S. private-equity
contingent," said Jason Sparaga, president of Spara
Capital Partners Inc. With mid-market valuations out of
control, coupled with the high dollar and a struggling
manufacturing sector, it's no surprise PNC is coming here, Mr.
Sparaga says. "They are here to take advantage of the
anticipated softness in the market."
Another clue is the new hire: Steve Smith, former senior
vice-president of GE Capital Canada, the company that
engineered the Stelco buyout, will run the Canadian operations
for PNC.
Despite the spectre of a shake-out in the market, mid-level
private-equity firms continue to look for deals in Canada.
"Canada is an area that we historically hadn't focused
on, but we think there's a tremendous opportunity to get into
the market there," said Michael Pohlen of Piper Jaffray
& Co.
Boston-based Audax Group purchased Saskatoon-based
Cover-All Holdings Inc. in October, and Providence-based
Nautic Partners Inc. snapped up Canada Cartage from Canada
Cartage Diversified Income Trust in July.
At the recent ACG Capital Connection event held in Toronto,
more than 50 U.S. private equity firms set up booths. "It
was the largest event in our five-year history, which speaks
to the interest and appetite for Canadian companies,"
said Dan Amadori, president of ACG Canada and head of Lamerac
Financial Corp.
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