Venture-backed company exit activity showed little signs of life during the third quarter of 2009 and fell far short of historical norms, according to the Exit Poll report by Thomson Reuters and the National Venture Capital Association.
While there were three venture-backed IPOs in Q3, a slight decline from the second quarter of 2009, the third quarter saw the largest venture backed IPO offering since March 2007.
The tally of M&A exits as of the last day of the quarter was 62 totalling USD1.2bn, with average disclosed value falling back to first quarter levels.
"The fact that many in the media are classifying three IPO’s as resurgence is evidence of how low our expectations have become," says Mark Heesen, president of the NVCA. "While we are encouraged by the success of the companies that have gone public, their performance has yet to translate into a filling of the pipeline. Companies simply are not registering to go public yet. On the acquisitions side, both volume and average disclosed value declined in the third quarter which is not the direction we hoped to see. While the psychology of the market is trending positive, our original forecast of a true recovery not beginning until 2010 still unfortunately holds true."
There were three venture-backed IPOs valued at USD572.1m in the third quarter of 2009, a slight decline from the second quarter of 2009. With eight venture-backed initial public offerings through the first nine months of the year, 2009 has already bested the full-year 2008 total.
Two of the three IPO exits for the quarter were in the information technology sector, accounting for a total of USD487.1m. Within this sector, Massachusetts-based battery manufacturer, A123 Systems, raised USD380.4m in the largest venture-backed IPO exit of the quarter and the largest venture-backed IPO since March 2007. LogMeIn, a Boston-based provider of remote access applications, began trading on 1 July and raised USD106.7m in the communications and media sector.
In the life sciences sector, Cumberland Pharmaceuticals, a specialty pharmaceutical company based in Nashville, Tennessee, raised USD85m via an IPO on Nasdaq.
There were no IPOs by US venture-backed companies on a foreign exchange in the third quarter.
Of the three IPOs in the third quarter, two were trading at or above their offering prices as of 30 September 2009. Eighteen venture-backed companies are currently filed for an initial public offering with the SEC.
As of 30 September, 62 venture-backed M&A deals were reported for the third quarter, 21 of which had an aggregate deal value of USD1.2bn. The average disclosed deal value was USD57.5m.
The information technology sector led the venture-backed M&A landscape, with 51 deals and a disclosed total dollar value of USD1.1bn. Within this sector, computer software and services and internet specific companies accounted for the bulk of the targets, with 26 and 11 transactions, respectively, across these sector subsets. The non-high technology sector saw the next highest level of activity with seven deals and a combined disclosed value of USD140.4m. Finally, life sciences deals accounted for three M&A exits with USD12.1m in disclosed values.
In the biggest deal of the quarter, VMWare acquired SpringSource Global, a San Mateo, California-based developer of open source software for USD362m. It was a tie for the next largest transactions of the quarter as McAfee acquired MX Logic, a developer of email protection services, and Intuit acquired PayCycle, a provider of self-service payroll and tax management services, both in deals valued at USD170m.
Deals bringing in the top returns, those with disclosed values greater than four times the venture investment, accounted for just ten per cent of the total in the third quarter of 2009. Venture-backed M&A deals returning less than the amount invested accounted for 52 per cent of the quarter’s total, compared to 42 per cent of the total in the previous quarter.
