The Canadian private equity landscape finds itself in a transition period. Prolonged market volatility continues to stall traditional exit activity as the backlog of portfolio companies awaiting their exit grows. However, Canada remains an attractive source for targets in high-growth sectors, with larger commitments contributing to a resilient Q3 2026.
In this edition of the Bennett Jones PE Briefing, we provide our analysis and commentary on: the third quarter performance for Canadian PE; trends in power and utilities investments; the expansion of evergreen funds; and the state of play for the Canadian healthcare industry.
Canadian PE Activity
Despite a challenging operating environment, the Canadian private equity market remained resilient through the summer, with reported deal value reaching US$9.35 billion across 45 announced or closed transactions. Aggregate deal value increased approximately 86% relative to Q3 2025, underscoring a continued preference for fewer, larger and higher-conviction investments, particularly across energy, infrastructure and other strategically important real asset sectors.
Selectivity remained the defining characteristic of dealmaking activity in Q3 2026, extending trends established in the first half of the year. Persistent valuation gaps continue to constrain exit activity and delay distributions to investors, pushing the median holding period to 5.3 years. In response to a more complex transaction environment, private equity sponsors and alternative asset managers are increasingly prioritizing stable, cash-generative assets with long-term contracted revenue profiles.
In Canada, this dynamic has contributed to greater use of partnership and joint venture structures between financial sponsors and strategic operators to facilitate large-scale transactions in critical infrastructure and energy markets. A notable example is KKR's announced partnership with Enbridge to fund the Aspen Point and Sunrise Expansion Programs of the Westcoast Pipeline System, with Bennett Jones acting as Canadian counsel to KKR. The transaction highlights the growing role of collaborative capital solutions in executing megadeals while balancing scale, operational expertise and long-term value creation objectives.
Escalating Tariffs Weigh on Dealmaking
Throughout Q3 2026, CUSMA negotiations and ongoing tariff escalation weighed on private M&A activity, prompting a more cautious stance among both buyers and sellers as the full impact of the new trade rules unfold. While Canadian economists have generally agreed that the economy will be able to absorb the tariff shock, the resulting uncertainty will undoubtedly influence certain investment decisions and deal dynamics, shaping transaction activity through the balance of the year and likely creating stronger support demand for industrials and aerospace and defence sectors.
Small- and mid-market companies in tariff-exposed sectors, particularly those reliant on cross-border trade, are facing increasing pressure from the higher costs and supply chain disruption. US tariffs have negatively affected 26% of Canadian business owners, and 28% say the countermeasures will have similar consequences, according to the Financial Post. As businesses and consumers respond to rising import costs and inflationary pressures by diversifying suppliers, some Canadian GPs may face heightened challenges around portfolio performance, valuation growth and future fundraising. Nevertheless, Canada's political stability, combined with the suite of capital commitments following the Canada Investment Summit and the new "Productivity Mega Deduction," continue to support investor confidence. As a result, deal flow has remained relatively resilient, even as managers adopt a more selective approach and intensify portfolio management efforts.
Canadian Power Play Garners Global Attention
Power and utilities continue to emerge as one of the most compelling infrastructure investment themes in Canada, driven by accelerating electricity demand, data centre development, energy security priorities and the modernization of critical infrastructure. Globally, private equity and venture capital investments in the power and utilities sector reached US$69.52 billion in 2025, a 50% year-over-year increase, and investment in the US and Canada utilities sector stood at US$53.49 billion in 2025, accounting for 76.9% of total industry investment value last year, according to S&P Global Market Intelligence.
As investors increase allocations to the sector, Canadian assets are attracting growing interest from international private equity sponsors, infrastructure funds and institutional capital seeking long-duration, cash-generative investments with strong defensive characteristics. Notable transactions from Q3 2026 that underscore this trend include the aforementioned C$2.7 billion partnership between KKR and Enbridge to expand the Westcoast Pipeline System, Morgan Stanley Infrastructure Partners' (MSIP) acquisition of a 47.5% interest in the C$4.6 billion Greenlight Electricity Centre, and the completion of Apollo's acquisition of KKR's interest in the Pembina Gas Infrastructure joint venture, with Bennett Jones representing MISP and Apollo, respectively, as Canadian counsel.
Power and utilities assets have become a lynchpin within the broader energy investment landscape, which is positioned to benefit from increased electricity consumption, industrial growth, LNG development and AI-driven demand for data centre capacity. As noted in a recent interview with Brandon Freiman, KKR's head of North America Infrastructure, this long-duration growth opportunity "will continue unabated whether the recent tariff action on Canada is rescinded or amplified."
Looking ahead, transmission, distribution and power generation assets are expected to remain key areas of dealmaking activity as Canada works to expand and modernize its electricity network. Supportive government policies, including the National Electricity Strategy, Clean Economy Investment Tax Credits and financing initiatives through the Canada Infrastructure Bank, are further strengthening the investment case by helping to de-risk large-scale infrastructure development and attract private capital. Together, these market and policy dynamics position Canada's power and utilities sector as a strategic destination for investors.
Evergreen Expansion in Canada
Evergreen funds represent a growing share of overall private markets assets under management, with PitchBook estimating that total evergreen assets under management reached US$3.2 trillion globally at the close of 2025, with potential for those values to balloon to US$5.2 trillion by 2030. A slow PE exit environment that relies heavily on the secondaries market for liquidity has helped fuel the increase in evergreen funds, as investors continue to seek liquidity solutions and incorporate open-ended funds into their cash flow strategy. Evercore's H1 2026 Secondary Market Review reports that evergreen vehicles now account for approximately US$500 billion of industry AUM in the US, including more than US$130 billion managed by secondary firms and roughly 45% of that being allocated to secondary investments.
In Canada, the evergreen strategy is largely still in the early days, with growing access to evergreen platforms likely pointing to an increase in their use domestically in the near future. For Canadian investors evaluating an evergreen fund, there are several advantages to this strategy, including faster capital deployment, J-curve mitigation, liquidity benefits, increased diversification exposure and reduced administrative burden for smaller institutions. Evergreen funds operate similarly to traditional private equity funds by pooling investor capital into a diversified portfolio of private companies, but they do not have a fixed end date or fundraising period. Instead, investors gain immediate market exposure and, as assets are sold, proceeds are automatically reinvested into new opportunities, creating a continuous investment cycle.
Despite growing popularity, evergreen funds still carry risks, including valuation complexity, tax considerations, limitations on redemption rights and fee layering. Current macro trends have additionally exacerbated concerns over manager performance, liquidity management and redemption request queues. Therefore, enhanced due diligence is required, especially at the fund manager level. Areas of focus for investors to discuss with their evergreen fund manager include performance and track record, quality of the deal flow, liquidity and operational management strategy, and overall alignment between evergreen investors and other vehicles.
Pulse Check on Healthcare
Despite mixed performance since the highs of the early 2020s, the Canadian healthcare industry is showing signs of promise. Changing market dynamics are creating new acquisition opportunities, with tech-backed solutions and regulatory modernization efforts supporting increased activity in three primary segments: 1) healthcare services and related healthcare infrastructure, 2) pharmaceuticals and biotechnology, and 3) medical technology and digital health.
Healthcare services: While experiencing an overall slowdown so far in 2026—healthcare services deal value in H1 2026 was 7.3% lower YoY for the US and Canada, according to Pitchbook—there remain bright spots in the healthcare services space, including tech-enabled operations and outpatient alternative care. Consolidation, carve-out deals and add-on transactions continue to drive PE dealmaking in this segment. In particular, home healthcare and elder care in Canada, supported by favourable demographic tailwinds and interest from strategic acquirers, is projected to reach a market size of US$26 billion, at 8.11% CAGR by 2030.
Pharma/biotech: Patent cliffs are contributing to a surge in activity for biopharma, with large-cap pharmaceuticals pursuing both scale and early- and growth-stage innovators to fill their pipelines. According to our Life Sciences Boom: H2 2026 Outlook, global biopharma M&A alone saw 14 deals totaling US$49 billion in value by May of 2026, following a record-setting US$112 billion in dealmaking in 2025. In late spring, Canada-based 35Pharma Inc. was acquired by GSK, a British multinational pharmaceutical and biotechnology company, for C$1.3 billion, demonstrating the global interest in Canada's drug discovery and development pipeline of assets.
Medtech: Advancements in technology, from AI-enabled diagnostics and smart device wearables to sophisticated robotics, are aiding the evolution of the medtech ecosystem. According to PwC, medtech deal value for the first half of 2026 reached US$36.5 billion in North America. Canada remains a global leader in the medical device market, and Health Canada's recent amendments to the medical device establishment licensing (MDEL) regime may facilitate increased dealmaking in this space. Under the new framework, foreign distributors are no longer required to hold an MDEL if they’re selling their medical devices through Canadian importers that have an MDEL.
Looking Ahead
As the full impact of the current trade environment continues to emerge, Canadian companies, asset managers and investors are preparing to navigate the latest wave of market volatility. Looking ahead to the final quarter of 2026, we expect the current bifurcated market dynamic to persist. Sponsors are likely to continue deploying premium capital toward high-quality assets in sectors aligned with national policy priorities, including energy, infrastructure, defence and technology, while broader market activity remains subdued pending clearer signs of recovery.
Valuation gaps between buyers and sellers also continue to constrain the private equity exit environment. With the IPO window remaining narrow, sponsors are expected to rely increasingly on secondary transactions and continuation vehicles to generate liquidity. As a result, evergreen fund structures are likely to gain further traction.
Bennett Jones Private Equity & Investment Funds Practice
The Bennett Jones Private Equity and Investment Funds group is a leader in Canada. Our clients include sophisticated financial sponsors who are looking to balance risk with expected return and who require tailored advice from the initiation of the investment phase through to exit. Bennett Jones represents all sides in private equity transactions, with particular depth on behalf of United States and domestic financial sponsors and Canadian institutional investors.
All numbers are according to Preqin data in US dollars unless otherwise stated. PE Deals data is for announced or completed deals where a Canadian company is the target, as of September 30, 2026.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
