Canada Q2 private equity, venture activity slows

(Figures in U.S. dollars unless noted)

NEW YORK, Aug 10 (Reuters) - Canadian private equity firms participated in more buyouts in the second quarter, but investors committed less per deal as they gauged the global recession, and venture activity slumped to a 14-year low.

According to data put out by the Canadian Venture Capital and Private Equity Association (CVCA) and Thomson Reuters, there were 24 deals reported in the period, compared with 21 deals in the same three months last year.

The data also showed that average transaction sizes sank in the quarter to $22.5 million, with smaller deal sizes helping to cut total disclosed buyouts of Canadian companies to $860 million for the first half of the year from $4 billion invested in the first six months of 2008.

Canada's private equity buyout activity has been hit hard by the global economic crisis and resulting recession, with investors hesitant to commit to ventures until they are sure valuations have stabilized.

"The worldwide economic turmoil that began in Q4 2008 continued in Q1 and Q2 2009 and our industry, in common with most economic sectors, has not been immune from its effects," said CVCA President Gregory Smith.

VENTURE CAPITAL INVESTMENT TUMBLES

At the same time the CVCA said venture capital activity had its worst quarter in nominal terms in 14 years and its worst first half in 13 years.

Some C$179 million in venture capital funds was invested in Canadian companies nationwide in the first quarter, down 42 percent from the C$309 million in the same period last year. Activity contracted 34 percent versus the first quarter of this year, when C$272 million was invested.

"The data conclusively demonstrates that there is a venture capital crisis in Canada," said Smith.

He said reduced venture capital activity was across the board in the second quarter in 2009, with an especially sharp decline by U.S. venture capital funds and other foreign investors, which at C$26 million brought in 76 percent less to deals than the C$112 million contributed in the second quarter last year.

"We have a structural problem and this means Canada's ability to drive innovation will weaken and we will see the overall economy suffer."

($1=$1.09 Canadian) (Reporting by Pav Jordan; editing by Rob Wilson)