After another significant year of performance in the Canadian private equity market, 2026 is poised for another period of strong deal-making volumes, says Patrick Shea, partner and co-head of the national private equity group at McCarthy Tetrault.
He sees 2026 as a strong year, like 2025 and 2024 before, based on the number and size of deals in Canada. The country is offering institutional investors opportunities in the artificial intelligence revolution, information technology and infrastructure, he adds.
“The fact that the large institutional investors, including the pension funds, remain committed to private capital as a class — even if there might be a shift from direct investments to more co-investing alongside a private firm, . . . [shows there’s no] retreat from the asset class.”
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According to McCarthy Tetrault’s latest market breakdown report, Canada saw about 488 private equity deals in 2025, resulting in roughly $46 billion in value.
“Even though deal value might end up slightly lower . . . [and] deal count might come down a bit, we’re comparing it to a record-breaking [2024],” he says. “It was another, it was a second consecutive year of very solid PE transactions in Canada.”
In 2024, the Canadian market reported 646 deals resulting in $57 billion in value, a banner year after a stretch of limited deal-making value from 2020 to 2023, according to McCarthy Tetrault’s research.
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Deals in the business products and services sector led the entire private equity market and accounted for $14.7 billion as of Nov. 30, 2025, compared with $16.2 billion in 2024. Energy deals were No. 2 with a $12.2 billion valuation.
Take-private deals have significantly contributed to the deal size increasing in the yearly account, he adds. “There’s been a number of very large take-privates by private equity and institutional investors, which demonstrates the interest that the private equity industry has — it’s not just for well-run mature, privately held businesses but also public companies, where they think there’s value in taking it private.”
Private equity exits declined considerably in 2025, according to the report, with 65 transactions compared to 117 in 2024. Shea says the slowdown in exits is related to longer hold periods for certain assets with distributions slowing down, meaning allocations are close to the exceeded capacity range. Moving forward, he anticipates Canadian exits to increase again.
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Leading up to 2021 private equity firms were distributing about 20 per cent per year back to limited partners but, in the current market environment, that annual payout rate is about 10 per cent, according to a report by Franklin Templeton.
“This sharp reduction is largely attributable to the slowdown in exit opportunities, such as [initial public offerings] and [mergers and acquisitions], which has resulted in fewer liquidity events for investors,” the report said. “Consequently, many institutions have found themselves overallocated to private equity, compounded by their ongoing commitments to new funds even as distribution rates have fallen.”
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