The Quebec government and the National Bank are teaming up to launch a new $300 million fund aimed at supporting entrepreneurs at the helm of medium-sized companies. Quebec will release $45 million to this fund called Norea Capital II.
Investissements Groupe Familles d'Affaires – a group of six large industrial families – is participating with a reach of more than 100 million people, while private investors and the National Bank are completing the investment.
This fund aims to enable entrepreneurs running medium-sized private companies (turnover from 25 million to a few hundred million) across the country, in all sectors of the economy, to implement succession, growth, acquisition, digital transformation and energy transition projects. .
The companies backed will benefit from the support of a group of investors who are also said to be successful entrepreneurs. In other words, it is an opportunity to access business networks and expertise.
President and Managing Partner of Norea Capital, Luc Ménard, says he is already in discussions with about fifty companies and that the first investment from the Norea Capital II fund should materialize in the coming months. “We intend to invest in three or four companies annually over the next four or five years. We are talking about a portfolio that will contain 12 to 15 companies in promising sectors.”
Investments should generally range between fifteen million and $40 million. Some investments can be larger.
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Luc Menard was Executive Vice President, Managing Director and Head of Private Placements at National Bank until the recent creation of Norea Capital.
The goal is to achieve returns of more than 15% per year for investors year after year. “Typically, in private placements, we always talk about target returns of 15 to 20%. The investment horizon is long-term,” says Luc Menard.
“Private placement is an interesting asset class from a return perspective, but it is less liquid than other asset classes,” he adds.
Luc Minard explains that the fund allows investors of all sizes access to a private placement asset class, which is often reserved for institutional investors.
Noria Capital, a spin-off of National Bank, is the new private placement manager to which the previous team of National Bank private placement staff has been transferred.
These managers were also given responsibility for the National Bank's SME Growth Fund, renamed the Norea Capital Fund I. This $200 million fund was created in 2020 in the context of the pandemic, also in partnership with Quebec.
The decision to make the management of these funds independent was made “because doing private placement within a financial institution with a federal charter can be complex and restrictive in terms of compliance,” says Luc Menard.
“We maintain a partnership with the National Bank which remains an investor at the table, but the new structure allows us to consider investments in companies that would have been impossible to invest in in the past.”
The Norea Capital II Fund remains open to welcome new investors until June 22.
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