DISCUSSION: Capital Gains Tax increase impact on Canadian High Finance and PE

Private equity was already challenging in Canada, so I wanted to create a discussion thread for private equity investors, principals, and anyone with thoughtful insights on the impact of this capital gains tax.

My insights: aside from Onex and OTPP, private equity in Canada has never really been taken as seriously as in the U.S. Private equity firms in Canada often acquire companies but hold them under a corporation and don’t exit aggressively like in the U.S. It’s already difficult to secure financial sponsorship, and from what I’ve heard, it often comes from the "same few people." Overall, it isn’t really private equity; more so, private equity roles here are more about asset management and long-term portfolio operations.

With the capital gains tax increasing to 66%, is it crazy to think that private equity firms will look to aggressively exit their investments and explore other ventures? This may seem a bit aggressive, but private equity has dwindled down to a business model where investors operate LMM search funds to acquire businesses from entrepreneurs looking to retire. This model has been active for a long time, but it doesn’t look like this model will last.
It already wasn’t a "purchase low with high leverage and sell high" business model (I know this is overly simplified) like in the U.S. A friend of mine in the U.S. even said, "we make fun of firms like Novacap; it’s not even real private equity." I know his opinion is a bit harsh, but he’s not wrong. It wasn’t even real private equity to begin with, and the future of private equity seems to be dissolving.

The obvious impact would be that many people who’ve already made it to investment banking roles at the Big 6 won’t leave; the competition will continue to be fierce for investment banking jobs, and high finance, in general, will not be a feasible career for many because there are just so few roles available. There will be an oversupply of well-qualified candidates who won’t be able to achieve a career in finance. There won’t be as many buy-side companies hiring.

Canada itself is already a tiny village when it comes to finance. It seems like this impact will be an infectious plague across the entire industry.
The only solution here is not to complain and leave.