VC exits: M&As continue to grow, IPOs raise less and less, VC investments increase

Dan Primark points in this morning's edition of PE Week Wire to the latest numbers of Thomson Venture Economics and the NVCA (National Venture Capital Association) for VC-backed IPOs and M&As. The good news is that M&As are continuing on a reasonably steady pace, with 95 deals worth $5B in Q106, and 345 deals worth $16B in the whole of 2005 - this number actually excluding the Skype deal (worth $2.6B + a $1.5B earn-out). The bad news is that IPOs have trickled down to a meager $540M raise in 10 operations in Q106.
I was discussing with a VC friend of mine the other day, pointing out that an IPO in the US was becoming less and less credible for VC-backed companies - leaving them with 3 other options: floating on a non-US exchange (like London), M&A and private equity buyout where a “new round” of investors purchase a large portion of the shares by founders and early stage investors - fueling the growth of the company.

BusinessWeek’s Tim Mullaney has a good commentary on the IPO environment: Boo Hoo Hoo for VCs and IPOs?

 

This information is interesting to contrast with another number also mentioned this morning (by the Herring): in Q106, VC investments in the US have increased to $6.5B - which represents a 30+% growth compared to Q105. Definitely not a trivial increase… $6.5B represents is the biggest quarter in five years.

Comments

[Craig]

An emerging class of take-out money comes in the form of special purpose acquisition companies (SPACs). These blank check, shell companies raise money simply to effect an acquisition, thereby turning their prey into an instant public company. Why wait to do an IPO when one comes right to you?