Takeovers and asset sales are continuing at a record pace, despite bleak headlines out of the Middle East and the gloomy outlook for IPOs, writes Andrew Willis.Mark Blinch/Reuters
There is more traffic moving through the Strait of Hormuz than the domestic initial public offering market.
The dearth of potential Canadian IPOs, owing in part to the uncertainty kicked off by the U.S. and Israeli war with Iran, could have brought private equity deal-making to a screeching halt too. Fund managers traditionally rely on public markets when they want to exit investments and raise cash for a new round of acquisitions.
In a sign of how private equity has evolved, takeovers and asset sales are continuing at a record pace, despite bleak headlines out of the Middle East and the gloomy outlook for IPOs.
Last week, private equity pioneer KKR & Co. Inc. and Abu Dhabi-based Mubadala Investment Co. staged one of the sweetest exits ever seen in domestic tech by selling Calgary-based CoolIT Systems Inc. for US$4.75-billion.
KKR and Mubadala – both of which own a number of Canadian businesses – cashed in through selling to a rival in what is known as a strategic sale, selling CoolIT to industry rival Ecolab Inc. Both companies make gear that chills computer chips and demand is soaring as data centres spring up around the globe.
Metatek IPO prices below marketing range, reflecting soft investor demand
KKR acquired CoolIT three years ago for US$270-million, and sold the business for a heady 29 times its forecast 2026 adjusted operating earnings.
Getting this sort of premium valuation on an investment, while public investors are fixating on stranded oil tankers, speaks to the mindset in private equity and public company boardrooms.
Institutional investors and CEOs are looking past the Iran conflict and continuing to put cash to work. Private equity fund managers, bankers and lawyers all say the M&A pipeline is as busy as they’ve ever seen it, despite retail investors’ limited interest in committing more of their savings to stocks and IPOs.
In 2025 and 2024, not a single private equity fund cashed out on an investment through a domestic IPO, according to a study by the Canadian Venture Capital & Private Equity Association (CVCA).
In comparison, 2021 was a banner year for IPOs that saw PE funds pull in $1.9-billion from taking companies public.
The IPO drought broke in February, just before bombs fell on Tehran, when OMERS raised $24.5-million from selling a portion of its stake in AGT Food and Ingredients Inc. as part of the Regina-based company’s $450-million market debut.
Since the Iran conflict began, AGT shares have traded significantly below their $23 offering price. Shares in Metatek-Group Ltd., which went public last week in a $40-million offering, are also trading below their IPO price of $5 each.
With IPOs on hold, last year saw PE fund managers raise $2.4-billion from 40 M&A transactions – mainly strategic deals similar to the CoolIT sale, according to the CVCA.
AGT Food and Ingredients stock stumbles on first day of trading
They also refuelled by doing secondary sales, selling parts of their portfolios to other institutions. One of last year’s largest PE transactions saw the Canada Pension Plan Investment Board take in $1.2-billion from selling long-held PE investments to the secondary divisions of Ares Management LLP and CVC Capital Partners Ltd. That’s money CPPIB can turn around and invest.
By raising cash from selling businesses and raising new funds, private equity investors set a new record for acquisitions last year, according to the CVCA. They committed $57.5-billion in 592 transactions, double the previous record of $27.2-billion set in 2024.
The total included $26.5-billion that private equity funds spent to buy publicly traded companies. In a report, the CVCA said the steady stream of PE acquisitions “highlighted a growing shift among large Canadian companies toward private markets to fund their next stage of growth.”
In the next few weeks, as the Trump administration searches for an off ramp in Iran, there will be very little IPO activity. A US$275-million offering on the Nasdaq exchange from The Metals Royalty Co., a Calgary-based company that funds deep-sea mining, will test investors’ appetite.
That doesn’t mean PE activity will slow. More go-private transactions are likely to be announced. Regina-based data provider Information Services Corp. is well into a sales process that’s attracted bids in the $1-billion range from the private equity arms of domestic pension plans and Australian suitors.
For institutional investors with a five-year-plus time horizon – most PE funds can hold on to investments for a decade – a stock slump driven by geopolitics is a buying opportunity.
A prolonged drought in IPOs will have cash-heavy PE fund managers acting on Warren Buffett’s well-worn advice, and being greedy when others are fearful.