VC-Backed M&A Deals Continue to be More Dominant Over IPOs in Q2 2006
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19 venture-backed companies raised $2.0 billion through initial public offerings (IPOs) on US exchanges in the second quarter of 2006, according to the Exit Poll report by Thomson Financial and the National Venture Capital Association (NVCA). |
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This volume represents a 90% increase from 1Q 2006 when 10 venture-backed companies went public. It is also near double the volume from a year ago when 10 companies went public during the same period. In addition, there were 86 venture-backed acquisitions with a disclosed value of $3.2 billion reported in the second quarter. VC backed startup companies have a multitude of exit and liquidity options – US IPOs, acquisitions, foreign exchanges, and buyout rounds. Returns on total investments in the second quarter mirrored those of the first quarter. Deals bringing in the top returns, those with values greater that 4x the venture investment, accounted for 29% of the total. This compared to 33% last quarter. Conversely, those deals returning less than the amount invested accounted for 29% of the quarter’s total, up from 17% of the total last quarter. |
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The technology sector had 8 companies raise a total of $1.4 billion in the second quarter. The largest IPO of the second quarter was the $531 million offering from Vonage Holdings Corporation. Vonage was backed by New Enterprise Associates, Bain Capital, 3i, Meritech Capital Partners, and Institutional Venture Partners. The Life Sciences sector led the IPO activity with 9 venture-backed IPOs raising a total of $452.2 million in the second quarter. The largest IPO in the Life Sciences sector was the $106.5 million offering from Northstar Neurosciences, Inc., a Seattle, Washington-based medical device company backed by Mayfield Fund, Domain Associates, Canaan Partners, and AEA Investors. In addition to the IPOs completed this quarter, there are currently 41 venture-backed companies “in registration” with the United States Securities and Exchange Commission. The average disclosed M&A deal size was $95.4 million, a slight decrease from first quarter’s average, but in line with the average deal size for 2005. Median deal size remained strong in the first quarter, with a median disclosed value of $55.0 million. This compares to a median disclosed deal size of $67.5 million in the first quarter, and $31.0 million in the fourth quarter of 2005. The Technology sector continued to dominate the venture-backed M&A landscape, with 74 deals and a disclosed value of $2.6 billion. Within Technology, the Computer Software sector had 34 transactions, followed by the Internet Specific sector with 24 deals. Despite only six companies (four with disclosed values) acquired during the quarter in the Communications/Media sector, the sector lead all Technology sectors with $804.7 million in total disclosed deal value. Eight Life Sciences companies were acquired, with a disclosed deal value of $512.0 million. The largest technology M&A deal was the $420 million acquisition of open source software developer JBOSS, Inc. by Red Hat, Inc. |
