Growth capital is reaching historic highs in Quebec, while venture capital is experiencing a decline. This polarization reflects current geopolitical challenges and is reshaping the corporate financing landscape.
An analysis by Réseau Capital on investment flows shows that Quebec is leading the Canadian growth capital market, with $18.3 billion invested in the first half of 2025 across 192 transactions—the province’s best performance for a first half-year since 2013.
This spectacular growth is largely driven by a few mega-deals, notably Garda World Security Corp ($14B), which alone accounts for 77% of the total invested. Héroux-Devtek ($1.4B) and Telus Health ($488M) round out the top three.
At the other end of the spectrum, 61% of transactions are under $5M, revealing a two-speed configuration: a large number of small deals and a handful of very large ones capturing most of the capital.
Seed Stage Stands Out
Venture capital, on the other hand, is following an opposite trajectory. Only $524M has been invested in Quebec so far this year in this segment, a 57% drop compared to the same period in 2024. The number of transactions remains stable (60), but the average deal size is shrinking.
Only seed-stage investments are bucking the trend, with a 31% increase in capital invested ($79M across 29 transactions), representing nearly half of all recorded deals.
Quebec now ranks fifth in Canada for average venture capital deal size, which stands at $8.73M.
A Changing Transactional Environment
These trends are part of a broader transformation in the M&A market, as explained by Angelo Noce, partner at Blake, Cassels & Graydon LLP, in one of our podcasts on M&A trends.
According to Noce, the threat of a tariff war is already having tangible effects: “Some transactions have been suspended out of caution,” he says. Deals involving Canadian companies reliant on U.S. exports are particularly affected.
Nevertheless, he foresees a rebound in activity, driven by more stable interest rates, controlled inflation, and especially an abundance of capital waiting to be deployed. Companies focused on the domestic market continue to attract interest, encouraging consolidation among Canadian players. “Record levels of available capital will need to be deployed soon,” Noce anticipates, predicting a possible catch-up by late 2025 in Canada.
Contractual Tools Gaining Popularity
In a market that has become more favorable to buyers, they are now able to negotiate terms that were previously hard to obtain. Earn-out clauses, tied to future company performance and nearly nonexistent in 2019, have become common since the pandemic, now representing 20% to 30% of the purchase price over two to three years, according to the expert.
Another notable development is the rise of representation and warranty insurance. Once marginal, this practice has become standard in transactions involving private equity funds, drastically reducing the amounts held in escrow. In a $50M transaction, for example, the holdback drops from $5M to just $250,000 thanks to insurance—a change that frees up capital for sellers and eases relations with minority investors.
Sectoral Outlook
Sectoral diversification, with sustained activity in manufacturing, retail, and financial services, offers encouraging prospects for the rest of the year, according to Réseau Capital’s report.
Agri-food stands out as particularly resilient, says Angelo Noce, who even anticipates “a significant increase in 2025” in this sector, driven by supply chain reorganization.
Defense and nuclear energy are other promising sectors, according to an analysis by PwC Canada. Benefiting from relatively favorable tariffs, several Canadian exporters are “better positioned than their competitors” to increase their market share in the U.S., the authors note.
Considering a transaction or seeking financing for your business? The expert team at EC2 has the experience to guide you through this evolving market and help you seize the right business opportunities. Contact our specialists today to discuss your projects and receive personalized advice.
