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Venture Exit Trend: More M&A and Fewer IPOs

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July 9, 2012

Globally, M&A dealmaking is stalled in the first half of this year, according to data gathered by Zephyr and reported in an article in Xconomy (see Zephyr image below). But when it comes to VC-backed companies the trend is slightly different. The latest data from Dow Jones VentureSource says that IT and software M&A is on the rise, while IPOs are slowing for most regions, except Silicon Valley startups. The second quarter ended with 11 IPOs of US venture-backed companies, nine fewer than the first quarter.

Other findings

  • Eleven US venture-backed companies raised USD 7.7 billion through IPOs in the second quarter, a drop in offerings from the same period last year when 14 IPOs raised USD 1.7 billion.
  • M&A increased slightly to 110 deals, up from the 98 M&As in the first quarter of 2012 but a 6% decline in deal activity compared to the second quarter of 2011.
  • IPOs are down due to the economic situation in Europe and Facebook’s problematic public debut, according to the report.
  • Currently, 44 U.S. venture-backed companies are in IPO registration. Eleven of those companies registered in the second quarter.
  • Information technology (IT) was the most active industry for M&A as 47 deals raised $5.3 billion, a 9% increase in deals and 40% increase in capital raised.
  • The healthcare industry saw a drop in deal activity as the number of acquisitions fell from 25 in the second quarter of 2011 to 18 in the most recent quarter. (Image source: DJ VentureSource)
  • It is taking less time for VC-backed companies to reach an M&A or buyout: a median of 5.1 years, which is slightly less than the 5.7-year median a year earlier.

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