Exits for Venture-Backed Companies

As we often note, exits for venture-backed companies are a very important part of the cycle for growth companies, as they provide funds that can be re-invested in new innovators.  Information through the third quarter of 2014 indicates that both the initial public offering market and mergers and acquisition activity are providing ample exit opportunities for venture-backed firms.  (NVCA Release)   There were 23 venture-backed IPOs in the third quarter, raising $2.6 billion; and for the year-to-date there have been 88 such offerings.  This total is already greater than the 81 IPOs in all of 2013 and the year-to-date total of $10.9 billion raised is closing in on 2013’s $11.1 billion, although average offering size is down slightly this year.  Life sciences companies continue to dominate IPO activity, with 18 of the third quarter’s 23 offerings being from these companies.  Most of the companies were US-based, but there were offerings from Israeli, Chinese, German and Swiss firms.  On a less positive note, only 14 of the 23 companies are currently trading above their offering price.  The IPO market definitely is frothy, with firms likely becoming public that really shouldn’t be, and is a clear sign of the overall richly valued stock market.

119 M & A deals occurred in the third quarter, and for the 32 for which a transaction value was reported, the total was $7.9 billion.  Average transaction size in the 3rd quarter was $248 million.   Total M & A activity for 2014 so far is 341 transactions, with the 100 with disclosed values totaling over $19 billion.  The total number of deals is approaching the number for all of 2013, which was 390 and has already eclipsed 2013’s total value for announced deals of $16.9 billion and the average announced transaction size is higher than in 2013.  Information technology was the leading sector for M & A activity, but health care companies accounted for 15 of the deals and over $3 billion of the announced deal value.  Interestingly, among publicized values, one-fourth of the transactions returned less than what the venture firms invested.  So even though M & A markets are strong, not every company is providing a good return.