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How will NAFTA talks impact Canada’s private equity industry?

Canada’s private equity industry is still projected to realize growth despite the uncertainties surrounding the North American Free Trade Agreement (NAFTA) talks.

In a think piece on the Private Equity News, industry expert Chris Cumming said even though fund raising in Canada has eased following a boom in the past year, the recent closing of Onex Corp.’s latest $7.15 billion fund is a reflection that the industry is still thriving. To recall, fundraising took a modest slump this year due to the looming threats surrounding the fate of the NAFTA.

“It isn’t hard to see why private-equity fundraising for Canada would decline following the presidential election of Donald Trump, who made unwinding NAFTA a central campaign platform,” Cumming said.

He furthered, “Canadian business depends heavily on exports to the U.S., and Canadian private equity is similarly dependent on outside money, with 70% of all deals this year through April involving foreign capital.”

Citing Reuters, Cumming noted that Onex’s new fund overtakes the $5.2 billion Canadian buyout funds closed during the first half of the year. In 2016, buyout funds reached a record-setting value of $45.4 billion.

While the Trump administration may not have made any progress in overhauling the trade agreement the way it wants, Mexico, Canada, and many huge US corporations firmly oppose the administration’s protectionist ideas.

“A wholesale rewrite of the deal now looks unlikely, and a unilateral U.S. withdraw, while still possible, would be a major gamble for the U.S. economy and would spark a severe backlash from the corporate sector,” Cumming noted. For Canada, this means its economy is not under a sort of immediate threat that would dampen private equity investment, which has been on an uptrend since 2009, with total deal value jumping $8.2 billion that year to $49.6 billion for 2016.