CVCA-Mood upbeat for Canada private equity conference

Wed May 25, 2011 3:00am EDT

* Dealmaking hitting levels not seen since 2008

* Liquidity booming, IPO market opening

* Foreign interest rising in Canadian opportunities (In U.S. dollars unless noted)

By Pav Jordan

VANCOUVER, May 25 (Reuters) - A resilient Canadian economy is drawing levels of private equity investment not seen since 2008 and attracting global technology giants like Google (GOOG.O), Groupon and Microsoft (MSFT.O).

Experts say technological innovation is blurring the traditional lines between venture capital, which typically invests in early stage technologies, and private equity, which is crossing increasingly into the sector that in Canada helped give birth to companies like Research In Motion RIM.TO, maker of the BlackBerry smartphone.

"When you have the major large-cap, technology companies in North America sitting on $500 billion in cash reserves, and with very aggressive growth plans for their own businesses, in an environment that is changing at light speed, they can't get there just by their own research and corporate development efforts, so they need to get there through acquisitions," said Steve Hnatiuk, chairman of the Canadian Venture Capital and Private Equity Association's annual conference.

The CVCA's meeting in Vancouver this week is attracting a record 600-plus participants, who between them represent hundreds of billions of dollars in investment capital.

This year's participants will for the first time include U.S. technology and social networking giants that are looking to Canada to buy technologies they cannot develop in-house, as well as the Canadian pension funds that were some of the world's largest private equity investors in recent years.

The Canada Pension Plan Investment Board, the country's second-largest pension fund administrator, will be a big winner when Microsoft buys Internet phone service Skype for $8.5 billion in its biggest-ever acquisition, placing a rich bet on mobile and the Internet to try to best rivals such as Google.

Private equity firm Silver Lake, eBay Inc (EBAY.O) and investors including CPPIB are seen making $5 billion on the deal, tripling their investment. [ID:nN10105729]

BOOMING LIQUIDITY

Google, Microsoft and RIM, have all announced acquisitions in Canada over the past year, quietly creeping into the country's venture capital landscape.

One CVCA panel will focus on the rise of Internet companies like Zynga, Facebook, Amazon, Google, Groupon and PayPal PAPXX.O, which have become multibillion-dollar operations in recent years even as traditional media companies decline.

But industry players say new business models that address the changing investing landscape mean problems, pitfalls and opportunities in private equity and venture capital.

"The venture community and even the PE (private equity) community are going through some structural change, and have been for the last three years," said Ross Bricker, chief executive of the AVAC venture capital fund from Calgary, Alberta.

"Over the last year and a half, we've seen a cautious return to investment," said Bricker, who has about 55 venture companies in his portfolio.

Canada's famed recession-era resilience has also made it a magnet for private equity and venture investors.

Soaring liquidity, backed by corporate players with stock valuations that have recovered from crisis-lows, and a budding appetite for initial public offerings, are creating a dealmaking environment not seen since 2008.

"The last 12 months or so have seen an obvious and clear uptick in the market generally, and I think what we'll see this week is an entirely different mood among the investment community," said Rick Nathan, managing director at Kensington Capital Partners, a Toronto-based firm with some C$500 million ($510 million) in capital under management.

"I know just from my own schedule that there's a lot of people that I want to meet with and who want to meet with me, and that's great," said Nathan, who is moderating a panel on Thursday on asset allocations.

The conference is also one of the largest of its kind in North America and attracts global and regional investors, including some of the world's largest venture capital players.

($1=$0.98 Canadian) (Editing by Janet Guttsman and Rob Wilson)

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