PE Tech Report

NEWSLETTER

Like this article?

Sign up to our free newsletter

US venture-backed liquidity market hovers at six-year low

Even with the end of a nine-month drought in initial public offerings, the second quarter was one of the worst for venture capital-backed liquidity since the doldrums of early 2003, acc

Even with the end of a nine-month drought in initial public offerings, the second quarter was one of the worst for venture capital-backed liquidity since the doldrums of early 2003, according to Dow Jones VentureSource.

Venture-backed liquidity fell 57 per cent from USD6.48bn in the second quarter of 2008 to USD2.8bn in the most recent quarter.

Venture capitalists generated USD2.57bn through mergers or acquisitions of 67 portfolio companies in the second quarter, a 60 per cent decline from the USD6.48bn raised via 89 M&As in the same quarter in 2008 and the lowest quarterly M&A deal total since 1999.

Three venture-backed companies made public-market debuts in late May and June, raising a total of USD232m. In the prior 13 months, only one other VC-backed company completed an IPO, in August 2008.

"The IPO window appears to be opening as the first three public offerings since the third quarter of 2008 closed in the second quarter," says Jessica Canning, director of global research for Dow Jones VentureSource. "The success of these transactions is clearly a testament to the strength of these companies and their ability to close deals in current market conditions."

According to VentureSource, the overall median amount paid for a venture-backed company in the second quarter of 2009 was just shy of USD22m – a 46 per cent drop from the nearly USD41m median paid during the same period in 2008.

"As valuations continue to fall, the market appears to be correcting the possibly inflated figures posted in 2007," says Canning.

The data showed that prior to achieving liquidity via a merger or acquisition in the second quarter, companies raised a median of USD16.3m in venture capital, 30 per cent less than the USD23.4m median seen during the same period last year. In addition, the median amount of time it took to reach liquidity via M&A was 4.5 years, 25 per cent less time than the six-year median in the second quarter of 2008.

The two largest M&As of the quarter belonged to Cisco Systems, which bought San Francisco-based Pure Digital, a maker of digital camcorders, for USD590m and Tidal Software of Palo Alto, California, a maker of workload management software, for USD105m.

The largest IPO belonged to SolarWinds of Austin, Texas, which raised USD113m in its May IPO. The company makes network and performance management tools for the enterprise.

Like this article? Sign up to our free newsletter

MOST POPULAR

FURTHER READING

Featured