U.S. VC-Backed IPOs Raised $3.7B in 2006; Venture-Backed M&A Raised $31B

There were 56 U.S. venture-backed IPOs completed in 2006, raising $3.72 billion, the most IPO activity and largest total raised since 2004. For the year as a whole, there were 404 venture-backed M&As with total deal value of $31.18 billion paid,  according to the Quarterly Liquidity Report from Dow Jones VentureOne. .

The 4th quarter was the best quarter for U.S. venture-backed IPOs with 18 initial public offerings (IPOs) completed, raising $1.23 billion. Venture-backed exits via mergers and acquisitions fell somewhat in Q4, with only 75 completed, and the total amount paid reaching $7.30 billion. 

VC-Backed M&A Activity in 2006:

  • For the year as a whole, there were 404 M&As and $31.18 billion paid, nearly even with the 407 acquisitions in 2005 but 4% more was paid for them.
  • The median amount paid for the acquired companies in 2006 reached $52 million, up from $47.2 million last year. 
  • The amount raised in equity prior to being acquired was $22.6 million in 2006, up slightly from $20.6 million in 2005. 
  • The time between initial equity financing and M&A also grew slightly longer in 2006, about 6 years, up from 5.4 years.
  • Technology companies remained the dominant industry for M&As in 2006, with 273 in total and $19.33 billion paid for them, 18 more technology acquisitions than last year and a 38% increase in the amount paid for them. 
  • The total number of health care acquisitions reached 74, nine fewer than last year, and the amount paid, $6.56 billion, was lower than a year ago. 
  • The largest venture-backed M&A of the year was the fourth quarter's $1.65 billion acquisition of YouTube of San Mateo, Calif., by Google (NASDAQ:GOOG).

VC-Backed IPO Activity in 2006:

  • For IPOs, the health care industry dominated the total number this year, with 28 completed, raising $1.36 billion. 
  • Information technology companies completed 20 IPOs, raising $1.95 billion, a considerable increase over the 11 technology IPOs that raised just $682.6 million in 2005. In fact, it was the most annual IT IPOs since 2000. 
  • The overall pre-money median valuation for IPO companies also increased, to $201.6 million, up from $165.8 million last year. 
  • For technology IPOs, the pre-money median valuation was $359.6 million, the highest annual median since 2000. 
  • The largest IPO of the year was for broadband telephone service provider Vonage (NYSE:VG) that raised $531.3 million in its May IPO. 
  • The largest of the fourth quarter was for data storage company Isilon Systems (NASDAQ:ISLN) , which raised $108.6 million in its December IPO.
  • Venture-capital backed companies required substantial equity investment before achieving an IPO, a median $51 million in 2006, about the same as in 2005 ($51.4 million). 
  • They required a bit more time to go from initial equity financing to IPO, 6.2 years vs. 5.6 years.

Dow Jones VentureOne (http://www.ventureone.com and http://www.venturecapital.dowjones.com) provide finance and investment data to the venture capital industry. Dow Jones VentureSource, an electronic database on the venture capital industry, is also published by VentureOne.

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