IPOs Heat Up, M&A Slows for Venture Capital Companies

NEW YORK, April 2, 2012 /PRNewswire/ -- The public markets showed a strong appetite for U.S. venture capital companies in the first quarter but corporations did not as the pace of acquisitions slowed dramatically. Twenty companies held initial public offerings (IPOs) during the first quarter making it the most active quarter for IPOs since the fourth quarter of 2007 and the most active first quarter since 2000. Ninety-four companies were acquired for $18.1 billion during the same period, the second-straight quarter of declining deal volume for mergers and acquisitions (M&As), according to Dow Jones VentureSource.

"Greater stability in the public markets, more corporations opening venture units to work closely with startups without acquiring them, and a continued disconnect between entrepreneurs' asking price and what corporations are willing to pay have contributed to a steady decline in M&A activity," said Jessica Canning, global research director for Dow Jones VentureSource.

Small- and Mid-Cap IPOs Take Center Stage

Twenty companies raised $1.4 billion through public offerings in the first quarter, significantly more exits and capital than the 11 IPOs that raised $768 million during the first quarter of last year.

"Big exits by Groupon and Zynga dominated the end of 2011, but small- and mid-cap IPOs have taken center stage so far this year," said Zoran Basich, editor of Dow Jones VentureWire. "The public markets proved receptive to a broad range of companies, which is a positive sign for the industry."

Currently, 50 U.S. venture-backed companies are in IPO registration. Thirteen of those companies filed during the first quarter.

It took companies a median of $68 million and 7.7 years to reach an IPO. That represents a 22% drop in capital raised but an increase in time from 6.2 years during the same period a year ago.

Google, 2011's Most Active Acquirer, Sits Out As Groupon Steps Up

Ninety-four mergers, acquisitions and buyouts raised $18.1 billion in the first quarter, a 32% decrease in deals and 42% increase in capital raised from the same period last year. The median price paid for a company spiked to $190 million from $43 million in the first quarter of last year.

Notably, Google, which was the most active acquirer of venture companies in 2011 with 12 acquisitions, did not buy any companies in the first quarter of 2012. Groupon, however, has been snapping up venture companies at a pace that rivals Google's in 2011. Flush with cash after raising $700 million through its November IPO, Groupon acquired six venture companies in the first quarter, double the three acquisitions the company made throughout 2011.

To reach an M&A or buyout, companies raised a median of $13 million in venture financing, 13% less than in the first quarter of 2011, and took a median of 4.9 years to build their company, slightly more time than the 4.6-year median a year earlier.

To download graphics or link to this release, visit http://www.dowjones.com/pressroom/releases/2012/04022012-VCExits-0025.asp.

For information on Dow Jones VentureSource's research methodology, visit http://bit.ly/VSFAQs. For more information about Dow Jones VentureSource, visit http://www.dowjones.com/pr/privatemarkets.

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