FCNB Capital Markets Report Reveals Varied Outcomes Over Five Years
SAINT JOHN – The Financial and Consumer Services Commission (FCNB) has released its 2016 New Brunswick Capital Markets Report, a report that looks at where New Brunswick entrepreneurs and businesses seek money or investments to fund their growth.
“Our goal is to provide stakeholders with a single source for in-depth information and analysis of our capital markets,” explains Jeff Harriman, senior analyst for capital markets at FCNB, in a release. “We continue to enhance our research and reporting by incorporating new and relevant information.”
The report looks at the data on more than $1.46 billion raised through direct investments received by New Brunswick companies between 2011 and 2015. This total comprises venture capital of $62.17 million, public companies raising $251.44 million and exempt markets distribution of $1.15 billion.
The report says that venture capital (VC) investments continue to play a key role in the province’s capital markets, though they have decreased. In 2015, New Brunswick companies attracted a total of $11.64 million compared to $14.08 million in 2014, a decrease of 17.3 per cent. In 2015, the VC funds raised were slightly below the cumulative five-year average of $12.43 million and the number of VC deals dropped by seven.
“However, the average size deal has continued to grow, with the average deal in 2015 at $780,000 compared to $640,000 in 2014,” said Harriman. “The increase in deal size was due to four early-stage New Brunswick companies that received deals worth between $1 million and $2.5 million.”
The report found that Information and Communications Technology (ICT) continues to be the main focus for VC deals attracting 88.6 per cent of total VC capital in 2015. Overall, the majority of VC deals were in the early and later stages of business development. Later stage VC investment increased by 127.3 per cent (from $990,000 in 2014 to $2.25 million in 2015) but remains below the five-year average of $4.8 million.
It also looked at the impact of the provincial government’s Small Business Investor Tax Credit (SBITC).
“There was a significant change to the SBITC program in 2015,” said Harriman. “The tax credit was increased from 30 per cent to 50 per cent of the amount invested. This had an immediate impact on New Brunswick’s capital markets as the total capital raised in 2015 using the program increased to $32.17 million an increase of 116.9 per cent over 2014.”
The report says New Brunswick public companies were relatively quiet in 2015, with a total capital raise of $19.94 million. It says all of these funds were raised using the exempt market.
The cumulative value of merger and acquisition (M&A) deals for New Brunswick for the five years ending in 2015 was $1.4 billion.
“New Brunswick companies have been actively purchasing companies within and outside New Brunswick with total acquisitions worth $769.25 million representing 53.98 per cent of all M&A activity,” said Harriman. “However, mergers and acquisitions in the year 2015 witnessed a significant drop to $125.28 million, down from $372.02 million in 2014.”