New data released from the National Venture Capital Association shows further evidence of a rebounding acquisitions and IPO market for venture-backed companies in the first quarter of 2010. We mentioned back in January about the slight uptake in activity in the final quarter of 2009, and it seems that trend has continued upward into the new year with record breaking M&A numbers and rebounding IPO data.
In the first quarter of 2010, Thompson Reuters and the NVCA tracked a record of 111 M&A deals for venture-backed companies, an all-time quarterly high from their history of tracking deals and the largest since Q1 2008’s 109 deals. Of these deals, 31 disclosed their values for a total of over $5.5 billion, averaging over $180 million per deal. This is more than four times the average deal size seen a year ago.
Information technology companies represented nearly three quarters of the 111 M&A deals (81 total), besting life sciences and non-high technology with just 21 and 9 deals respectively. Within the IT category, software and Internet snagged 61 of the 81 deals but accounted for just over half of the disclosed value of those deals. Life sciences companies continued to rake in more serious cash at a higher rate as over $2.9 billion was spent on their 21 deals; IT companies managed just over $2.2 billion.
Though 2009 saw just 12 venture-backed IPOs, Q1 2010 has already seen 9 IPOs, the largest quarterly amount since the offering-rich 2007 which saw 86 total IPOs valued at over $10 billion. This quarter’s offerings were more evenly distributed among the sectors than the M&A figures, as IT and life sciences saw 4 and 3 IPOs respectively. NVCA president Mark Heesen says the new numbers have “engendered a cautious optimism” within the VC industry.
“The IPO volume, while not nearly enough to declare a recovery, has shown the most improvement since the financial crisis began and the pipeline of companies in registration continues to build. The record breaking number of venture-backed acquisitions is also encouraging as the quality of these transactions appears to have held strong. It is premature to suggest we have permanently turned the corner, but that corner is in sight and within reach as long as we can continue this positive upwards trajectory over the next consecutive quarters,” says Heesen.
What this all boils down to is that venture-backed companies are more likely to find merger and acquisition deals before them this year than they have in several years. Additionally, the IPO data suggests that more of these companies could be going public in 2010 than did during the 2008/2009 slump.
This is a great sign for startups because when more companies are being bought or are going public, that means the economy is starting to turn around and that VCs will likely be more willing to invest in new companies. As we mentioned back in January, VCs were expected to spend more in Q1 2010 after raising an increased amount of funds in the final quarter of 2009. VC spending data on this first quarter should be out in the next few weeks from the NVCA, so stick around to see how those figures hashed out.
