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Complete report
M&A Market Overview
Berkery Noyes tracked 1,002 Private Equity transactions between 2009 and 2011, of which 302 disclosed financial terms, and calculated the aggregate transaction value to be $65.31 billion. Based on known transaction values, they project values of 700 undisclosed transactions to be $16.73 billion, totaling $82.04 billion worth of transactions tracked over the past three years.
The largest transaction tracked by Berkery Noyes between 2009 and 2011 was TPG Capital and CPP Investment Board’s acquisition of IMS Health Incorporated for $5.06 billion.
2011 Key Highlights
* Kohlberg Kravis Roberts & Co., Technology Crossover Ventures and Silver Lake Partners’s announced acquisition of GoDaddy. com was the largest transaction for 2011, with an acquisition price of $2.25 billion.
* The most active acquirer was Vista Equity Partners with 19 acquisitions: VaultWare, 360Facility, Beyond Compliance Inc., AngelPoints, Inc., Mitratech, Inc., Emerging Information Systems, Inc., Rainmaker Software, LLC, Bostonpost Technology, PowerPath from Elekta AB, Trade and Risk Management Business from Thomson Reuters, Sage Healthcare, CompuLaw LLC, Client Profi les, Inc., CyberShift, Inc., Workspeed Management, LLC, WellPoint Systems, Inc., EXPLORER Software Solutions Ltd., Siterra Corporation and GeoLearning, Inc.
2011 Key Trends
* Total transaction volume in 2011 increased by 16 percent over 2010, from 336 in 2010 to 389 in 2011.
* Total transaction value in 2011 increased by 28 percent over 2010, from $28.69 billion in 2010 to $36.75 billion in 2011.
* The median revenue multiple remained nearly the same, going from 1.7x in 2010 to 1.8x in 2011, while the median EBITDA multiple decreased from 10.2x to 9.1x.
Saturday, January 28, 2012
2011 Education Industry Merger & Acquisition Trends - Berkery Noyes
M&A Market Overview
Berkery Noyes tracked 656 Education Industry transactions between 2009 and 2011, of which 215 disclosed financial terms, and calculated the aggregate transaction value to be $19.45 billion. Based on known transaction values, they project values of 441 undisclosed transactions to be $5.57 billion, totaling $25.02 billion worth of transactions tracked over the past three years.
Based on volume, the most active market segment that Berkery Noyes tracked between 2009 and 2011 was Corporate and Professional with 200 transactions.
Berkery Noyes determined that the nearly one-third of companies sold between 2009 and 2011 received transaction values between $3 million to $33 million.
2011 Key Highlights
* The largest announced transaction for 2011 was Hellman & Friedman LLC’s acquisition of SunGuard Higher Education Inc. from SunGuard Data Systems Inc. for $1.78 billion. This will result in a merger under a new holding company with Datatel Inc.
* Overall, Pearson plc was the most active acquirer in 2011 with eight acquisitions: Global Education & Technology Group Limited, TQ Ltd., Connections Education LLC, Stark Verlag, Education Development International plc, SchoolNet, Inc., Smarthinking, Inc. and TutorVista.
* The most active financial buyer in 2011 was Providence Equity Partners Inc. with six acquisitions: Istituto Marangoni, CerBibo Corporation, Edline LLC, PrepMe, Blackboard Inc. and TH(i)NQ Ed.
2011 Key Trends
* Total transaction volume in 2011 increased by 10 percent over 2010, from 208 in 2010 to 229 this year.
* Total transaction value in 2011 stayed almost constant compared to 2010, moving from $10.16 billion in 2010 to $10.01 billion this year.
* The median revenue multiple remained nearly the same, moving from 1.9x in 2010 to 1.8x in 2011. Meanwhile, the median EBITDA multiple increased from 9.7x to 11.1x.
Complete report
Berkery Noyes tracked 656 Education Industry transactions between 2009 and 2011, of which 215 disclosed financial terms, and calculated the aggregate transaction value to be $19.45 billion. Based on known transaction values, they project values of 441 undisclosed transactions to be $5.57 billion, totaling $25.02 billion worth of transactions tracked over the past three years.
Based on volume, the most active market segment that Berkery Noyes tracked between 2009 and 2011 was Corporate and Professional with 200 transactions.
Berkery Noyes determined that the nearly one-third of companies sold between 2009 and 2011 received transaction values between $3 million to $33 million.
2011 Key Highlights
* The largest announced transaction for 2011 was Hellman & Friedman LLC’s acquisition of SunGuard Higher Education Inc. from SunGuard Data Systems Inc. for $1.78 billion. This will result in a merger under a new holding company with Datatel Inc.
* Overall, Pearson plc was the most active acquirer in 2011 with eight acquisitions: Global Education & Technology Group Limited, TQ Ltd., Connections Education LLC, Stark Verlag, Education Development International plc, SchoolNet, Inc., Smarthinking, Inc. and TutorVista.
* The most active financial buyer in 2011 was Providence Equity Partners Inc. with six acquisitions: Istituto Marangoni, CerBibo Corporation, Edline LLC, PrepMe, Blackboard Inc. and TH(i)NQ Ed.
2011 Key Trends
* Total transaction volume in 2011 increased by 10 percent over 2010, from 208 in 2010 to 229 this year.
* Total transaction value in 2011 stayed almost constant compared to 2010, moving from $10.16 billion in 2010 to $10.01 billion this year.
* The median revenue multiple remained nearly the same, moving from 1.9x in 2010 to 1.8x in 2011. Meanwhile, the median EBITDA multiple increased from 9.7x to 11.1x.
Complete report
2011 Information Industry Merger & Acquisition Trends - Berkery Noyes
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Complete report
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Berkery Noyes tracked 7813 Information Industry transactions between 2009 and 2011, of which 2505 disclosed financial terms, and calculated the aggregate transaction value to be $318.32 billion. Based on known transaction values, they project values of 5308 undisclosed transactions to be $64.95 billion, totaling $383.27 billion worth of transactions tracked over the past three years.
The largest transaction tracked by Berkery Noyes between 2009 and 2011 was Comcast Corporation’s acquisition of NBC Universal, a subsidiary of General Electric Company, for $22.85 billion.
Based on value, the largest acquirer, either purchased direct or through a partner or affiliated business between 2009 and 2011, was Comcast Corporation, which acquired certain assets or all of 6 properties: Matchbox Pictures Pty Ltd., Monkey Kingdom Limited, The 700 Level.com, Paciolan, NBC Universal and New England Cable News.
The median revenue multiple increased from 1.7x in 2010 to 2.1x in 2011, while the median EBITDA multiple increased from 10.5x to 12.0x. Total transaction volume in 2011 increased by 17 percent over 2010, from 2,639 to 3,098.
2011 Key Highlights
* HP’s acquisition of Autonomy Corporation was the largest transaction for 2011, with an acquisition price of $10.28 billion.
* The most active acquirer in 2011 was Google Inc. with 25 acquisitions: Clever Sense, Inc., RightsFlow, Inc., Apture, Inc., Katango, Inc., SocialGrapple, DailyDeal, Zagat, Zave Networks, The DealMap, Pittsburgh Pattern Recognition, Fridge, Punchd Labs Inc, SageTV, AdMeld Inc., PostRank Inc., Sparkbuy Inc., TalkBin, PushLife Inc., Green Parrot Pictures, BeatThatQuote. com Ltd., Next New Networks, Inc., Zynamics, FFlick, SayNow and eBook Technologies Inc.
2011 Key Trends
* Total transaction volume in 2011 increased by 17 percent over 2010, from 2639 in 2010 to 3098 in 2011.
* Total transaction value in 2011 increased by 27 percent over 2010, from $124.04 billion in 2010 to $157.91 billion in 2011.
* The median revenue multiple increased from 1.7x in 2010 to 2.1x in 2011, while the median EBITDA multiple increased from 10.5x to 12.0x.
Complete report
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Berkery Noyes tracked 7813 Information Industry transactions between 2009 and 2011, of which 2505 disclosed financial terms, and calculated the aggregate transaction value to be $318.32 billion. Based on known transaction values, they project values of 5308 undisclosed transactions to be $64.95 billion, totaling $383.27 billion worth of transactions tracked over the past three years.
The largest transaction tracked by Berkery Noyes between 2009 and 2011 was Comcast Corporation’s acquisition of NBC Universal, a subsidiary of General Electric Company, for $22.85 billion.
Based on value, the largest acquirer, either purchased direct or through a partner or affiliated business between 2009 and 2011, was Comcast Corporation, which acquired certain assets or all of 6 properties: Matchbox Pictures Pty Ltd., Monkey Kingdom Limited, The 700 Level.com, Paciolan, NBC Universal and New England Cable News.
The median revenue multiple increased from 1.7x in 2010 to 2.1x in 2011, while the median EBITDA multiple increased from 10.5x to 12.0x. Total transaction volume in 2011 increased by 17 percent over 2010, from 2,639 to 3,098.
2011 Key Highlights
* HP’s acquisition of Autonomy Corporation was the largest transaction for 2011, with an acquisition price of $10.28 billion.
* The most active acquirer in 2011 was Google Inc. with 25 acquisitions: Clever Sense, Inc., RightsFlow, Inc., Apture, Inc., Katango, Inc., SocialGrapple, DailyDeal, Zagat, Zave Networks, The DealMap, Pittsburgh Pattern Recognition, Fridge, Punchd Labs Inc, SageTV, AdMeld Inc., PostRank Inc., Sparkbuy Inc., TalkBin, PushLife Inc., Green Parrot Pictures, BeatThatQuote. com Ltd., Next New Networks, Inc., Zynamics, FFlick, SayNow and eBook Technologies Inc.
2011 Key Trends
* Total transaction volume in 2011 increased by 17 percent over 2010, from 2639 in 2010 to 3098 in 2011.
* Total transaction value in 2011 increased by 27 percent over 2010, from $124.04 billion in 2010 to $157.91 billion in 2011.
* The median revenue multiple increased from 1.7x in 2010 to 2.1x in 2011, while the median EBITDA multiple increased from 10.5x to 12.0x.
Wednesday, January 25, 2012
DIFFICULT Q3 2011 DID NOT SLOW IMPROVEMENTS IN LONG TERM VENTURE PERFORMANCE
10-Year VC Returns Continue to See Gains
A challenging IPO market in the third quarter of 2011 was not enough to stop the steady improvement of the 10-year venture capital return numbers, according to the Cambridge Associates LLC U.S. Venture Capital Index®, the performance benchmark of the National Venture Capital Association (NVCA). While performance notably fell for the quarter and one-year time horizons, venture fund returns for the 10-year horizon doubled from the previous quarter. The longer 15- and 20- year numbers remained relatively stable. Additionally, the venture capital index outperformed the DJIA, NASDAQ Composite and S&P 500 across every time horizon with the exception of the 10-year number where, despite recent gains, there remains significant room for improvement.
US Venture Capital Index Returns for the Periods Ending
“In the third quarter, the volatile exit market had an impact on the quarterly and annual return numbers,” said Mark Heesen, president of NVCA. “However, the exit market did stabilize at the end of the year and we now have a record number of venture-backed companies in registration to go public. If these companies are able to successfully IPO in the near term and the acquirers continue to purchase our companies, we expect to see consistent and marked performance improvements across all time horizons in 2012.”
“The marginally negative third quarter performance reflected the recent shakiness of the IPO market,” said Theresa Sorrentino Hajer, managing director and venture capital research consultant at Cambridge Associates. “Maintaining a longer term focus remains important, and we would expect the ten-year number to continue to improve as it moves beyond the poor return years of 2001 and 2002.”
Additional Performance Benchmarks
The full, comprehensive report includes industry sector returns and tables on additional time horizons, vintage years, and industry returns.
Cambridge Associates derives its U.S. venture capital benchmarks from the financial information contained in its proprietary database of venture capital funds. As of September 30, 2011, the database included 1,327 venture funds formed from 1981 through 2011.
Monday, January 23, 2012
New Study Examines Bankruptcy and Recovery Among Private Equity-Backed Firms
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Private equity firms—firms that finance acquisitions of other companies using substantial amounts of debt—are frequently characterized as the vultures of the finance world, swooping in to strip what value they can out of the newly debt-laden companies, then abandoning them to bankruptcy and liquidation.
But is such a characterization warranted? According to “Private Equity and the Resolution of Financial Distress,” a study presented at the January 2012 American Finance Association Meeting, the answer is a clear “no.”
The study, co-authored by Edith Hotchkiss of the Carroll School of Management at Boston College, David C. Smith of the McIntire School of Commerce at the University of Virginia, and Per Stromberg of the Institute of Financial Research at the Stockholm School of Economics, sought insight into two primary private equity-related questions. First, are private equity-backed firms more likely to declare bankruptcy than other debt-laden firms? Secondly, if bankruptcy is declared, how does the restructuring and recovery process of private-equity backed firms compare with that of non-private equity-backed firms?
“There’s a significant body of research, going back to the 1980s, on the various benefits of private equity ownership,” says Smith. “We wanted to see if there was a downside to having so much debt; we were curious to know what happens to private equity-backed companies when they hit a bump in the road—when they become unable to meet their financial obligations.”
To this end, Hotchkiss, Smith, and Stromberg compiled a pool of 2,156 “leveraged loan,” or high-credit-risk, corporate borrowers, 991 of which were backed by private equity firms—that is, acquired via a leveraged buyout by a private equity fund such as Bain Capital, The Carlyle Group, or Goldman Sachs Capital Partners. The period of analysis spanned some 13 years, from 1997 to 2010.
Their findings? Private equity-backed firms were indeed more likely to default than their non-private equity-backed peers; overall default rates for the two groups were 5 percent, versus 3.5 percent, respectively, on an annual basis. Critically, however, Smith points out, this difference in default rates was driven by the fact that private equity-backed firms, as a group, tended to have more debt and lower credit ratings at the time of buyout financing. Controlling for differences in credit ratings at the time of the granting of the loan, there was no difference in default probability for private equity-backed firms compared with other firms.
Moreover, Smith says, “we also have to recognize that when a company goes into default, it’s not the end of its life—it’s more like a bump in the road.” Indeed, he says, it’s how the company moves forward that really matters. “Oftentimes a firm comes out significantly stronger after a default and restructuring,” he points out.
In this regard, the study found that private equity-backed firms fared better than their debt-laden brethren. Upon entering bankruptcy, private equity-backed firms moved through the bankruptcy process about 30 percent faster than those in their peer group; were more likely to enjoy smooth, “out-of-court” or so-called “pre-packaged” agreements, and, critically, were far more likely to exit the bankruptcy process as intact, independent firms. Smith and his colleagues attribute these differences to private equity investors’ professionalism and reputational stake in the industry.
“There are plenty of things not to like about private equity investors,” Smith says. “They’re known for having big egos, for hosting obnoxious parties. But—when we look at the data—we can’t accuse them of turning their backs on the distressed companies.”
Private equity firms—firms that finance acquisitions of other companies using substantial amounts of debt—are frequently characterized as the vultures of the finance world, swooping in to strip what value they can out of the newly debt-laden companies, then abandoning them to bankruptcy and liquidation.
But is such a characterization warranted? According to “Private Equity and the Resolution of Financial Distress,” a study presented at the January 2012 American Finance Association Meeting, the answer is a clear “no.”
The study, co-authored by Edith Hotchkiss of the Carroll School of Management at Boston College, David C. Smith of the McIntire School of Commerce at the University of Virginia, and Per Stromberg of the Institute of Financial Research at the Stockholm School of Economics, sought insight into two primary private equity-related questions. First, are private equity-backed firms more likely to declare bankruptcy than other debt-laden firms? Secondly, if bankruptcy is declared, how does the restructuring and recovery process of private-equity backed firms compare with that of non-private equity-backed firms?
“There’s a significant body of research, going back to the 1980s, on the various benefits of private equity ownership,” says Smith. “We wanted to see if there was a downside to having so much debt; we were curious to know what happens to private equity-backed companies when they hit a bump in the road—when they become unable to meet their financial obligations.”
To this end, Hotchkiss, Smith, and Stromberg compiled a pool of 2,156 “leveraged loan,” or high-credit-risk, corporate borrowers, 991 of which were backed by private equity firms—that is, acquired via a leveraged buyout by a private equity fund such as Bain Capital, The Carlyle Group, or Goldman Sachs Capital Partners. The period of analysis spanned some 13 years, from 1997 to 2010.
Their findings? Private equity-backed firms were indeed more likely to default than their non-private equity-backed peers; overall default rates for the two groups were 5 percent, versus 3.5 percent, respectively, on an annual basis. Critically, however, Smith points out, this difference in default rates was driven by the fact that private equity-backed firms, as a group, tended to have more debt and lower credit ratings at the time of buyout financing. Controlling for differences in credit ratings at the time of the granting of the loan, there was no difference in default probability for private equity-backed firms compared with other firms.
Moreover, Smith says, “we also have to recognize that when a company goes into default, it’s not the end of its life—it’s more like a bump in the road.” Indeed, he says, it’s how the company moves forward that really matters. “Oftentimes a firm comes out significantly stronger after a default and restructuring,” he points out.
In this regard, the study found that private equity-backed firms fared better than their debt-laden brethren. Upon entering bankruptcy, private equity-backed firms moved through the bankruptcy process about 30 percent faster than those in their peer group; were more likely to enjoy smooth, “out-of-court” or so-called “pre-packaged” agreements, and, critically, were far more likely to exit the bankruptcy process as intact, independent firms. Smith and his colleagues attribute these differences to private equity investors’ professionalism and reputational stake in the industry.
“There are plenty of things not to like about private equity investors,” Smith says. “They’re known for having big egos, for hosting obnoxious parties. But—when we look at the data—we can’t accuse them of turning their backs on the distressed companies.”
Friday, January 20, 2012
ANNUAL VENTURE INVESTMENT DOLLARS INCREASE 22% OVER PRIOR YEAR, ACCORDING TO THE MONEYTREE REPORT
Clean Technology and Internet Sectors Show Double-Digit Gains in 2011
Venture capitalists invested $28.4 billion in 3,673 deals in 2011, an increase of 22 percent in dollars and a 4 percent rise in deals over the prior year, according to the MoneyTree Report by PricewaterhouseCoopers LLP and the National Venture Capital Association (NVCA), based on data from Thomson Reuters. The amount of venture dollars invested in 2011 represents the third highest annual investment total in the past ten years. Investments in the fourth quarter of 2011 totaled $6.6 billion in 844 deals, a 10 percent decrease in dollars and an 11 percent decrease in deals from the third quarter of 2011 when $7.3 billion went into 953 deals.
Double-digit increases in investment dollars in 2011 were spread across a number of industries, including the Clean Technology and Internet-Specific sectors. Investment dollars also increased across every stage of development category, with the exception of a 48 percent decrease in Seed Stage investments. First-time financings rose in 2011 compared to the prior year, however, fourth quarter investing did show a decline in both first-time dollars and deals when compared to Q3 2011.
"As previously projected, venture capital investing in 2011 exceeded 2010 levels and ranks in the top three years for VC investing in the past decade," noted Tracy T. Lefteroff, global managing partner of the venture capital practice at PricewaterhouseCoopers. "We saw a resurgence in investments in Clean Technology and Internet-specific companies in 2011, as well as a bit of a jump in average funding in the Internet sector. However, while venture capitalists continue to show their interest in these areas, they are acting prudently and not chasing excessive valuations. Accordingly, despite the increase in investing, we're unlikely to see these sectors overheat like we saw in the 1999 to 2000 era."
"While venture capital investment grew in 2011, it is important to note that deal volume growth did not keep pace with dollar growth,” said Mark Heesen, president of NVCA. “In most industry sectors, round sizes increased significantly, driving the higher investment levels across most stages of investment. Reasons for this phenomenon differ depending on area of investment. For some, the higher rounds are driven by the challenging exit market which requires venture capitalists to fuel their existing portfolios longer and at greater investment levels than in the past. This is particularly acute in the life sciences and clean tech sectors. In other sectors such as Internet, software and media, the higher rounds speak to increasing valuations. Given the diversity of the venture investment landscape, we expect these notable distinctions to continue into 2012 as our industry sectors are impacted differently by the continued economic uncertainty and ongoing opportunities in the market."
Sector and Industry Analysis
The Software industry maintained its status as the single largest investment sector for the year, with dollars rising 38 percent over 2010 to $6.7 billion in 2011, which was invested into 1,004 deals, a 7 percent rise in volume over the prior year. However, Software investing experienced a decline in the fourth quarter of 2011 with $1.8 billion going into 238 deals. Software was also the number one sector for dollars invested and total number of deals in Q4 and counted more than double the number of deals during the quarter than the second largest sector, Biotechnology.
Biotechnology investment dollars increased in 2011, jumping 22 percent but dropping 9 percent in deals, with $4.7 billion going into 446 deals, placing it as the second largest investment sector for the year in terms of dollars and deals. For the fourth quarter, Biotechnology investing increased 10 percent in dollars and 6 percent in the number of deals from the third quarter with $1.3 billion going into 111 rounds.
The Medical Device industry rose 20 percent in dollars and fell 2 percent in deals in 2011, finishing the year as the fourth largest sector with $2.8 billion going into 339 deals. For the fourth quarter, Medical Devices saw a drop of 35 percent in dollars and 15 percent in deals from Q3 2011 with $498 million going into 73 deals. The Life Sciences sector (Biotech and Medical Devices combined) accounted for 27 percent of all venture capital dollars invested in 2011 compared to 27 percent in 2010.
The Clean Technology sector experienced a 12 percent increase in both dollars and deal volume in 2011, bringing the year's total to the highest level ever recorded at $4.3 billion going into 323 deals, compared to $3.8 billion going into 289 deals in 2010. Clean Technology investing accounted for 15 percent of all venture capital dollars in 2011 compared to 16 percent in 2010. In the fourth quarter, venture capitalists invested $1.2 billion into 73 Clean Tech deals, up 34 percent in dollars but down 14 percent in deal volume from $914 million going into 85 deals in the third quarter. For the full year 2011, three of the top ten deals were in the Clean Tech category; four of the top ten deals in Q4 fell into the Clean Tech category as well. Clean Technology crosses traditional MoneyTree industries and comprises alternative energy, pollution and recycling, power supplies and conservation.
Internet-specific companies also saw a substantial increase in investing in 2011. The $6.9 billion going into 997 deals represented a 68 percent increase in dollars and 24 percent increase in deals from 2010 when $4.1 billion went into 807 deals. This year marked the highest level of Internet investment over the past decade. For the fourth quarter, Internet-specific investment declined 23 percent in dollars and 7 percent in deals with $1.3 billion going into 239 deals, compared to $1.7 billion going into 257 deals in the third quarter of 2011. ‘Internetspecific’ is a discrete classification assigned to a company whose business model is fundamentally dependent on the Internet, regardless of the company’s primary industry category. These companies accounted for 24 percent of all venture capital dollars in 2011, up from 18 percent in 2010.
Thirteen of the 17 industry categories experienced increases in dollars invested for the year. Industry sectors experiencing some of the biggest dollar increases in 2011 included: Consumer Products & Services (103 percent); Media/Entertainment (53 percent); Electronics/Instrumentation (52 percent); and IT Services (39 percent).
Stage of Development
Investments into Seed Stage companies decreased 48 percent in terms of dollars and were flat in terms of deals with $919 million going into 396 companies in 2011. For the fourth quarter, venture capitalists invested $134 million into 80 seed stage companies, a 40 percent decrease in dollars and a 28 percent decline in deals compared to the third quarter of the year. Seed Stage companies attracted 3 percent of dollars and 11 percent of deals in 2011 compared to 8 percent of dollars and 11 percent of deals in 2010. Seed stage deals were the only stage to experience a decrease in average round size for 2011.
Early Stage investments experienced double-digit increases, rising 47 percent in terms of dollars and 16 percent in terms of deals in 2011 to $8.3 billion in 1,414 deals. For the fourth quarter, Early Stage investments increased, with $2.3 billion going into 364 deals, an 11 percent increase in dollars in Q3 while the number of deals was flat. Early Stage companies attracted 29 percent of dollars and 38 percent of deals in 2011 compared to 24 percent of dollars and 35 percent of deals in 2010.
Expansion Stage investments increased in 2011 by 9 percent in dollars and dropped 8 percent in deals with $9.7 billion going into 999 deals. Expansion funding dropped in the fourth quarter, dipping 9 percent from the prior quarter to $2.4 billion. The number of deals also decreased during the quarter, falling 21 percent to 222. Expansion Stage companies attracted 34 percent of dollars and 27 percent of deals in 2011 compared to 38 percent of dollars and 31 percent of deals in 2010.
In 2011, $9.5 billion was invested into 864 Later Stage deals, a 37 percent increase in dollars and a 5 percent increase in deals for the year. For the fourth quarter, $1.8 billion went into 178 deals, which represents a 26 percent decrease in terms of dollars and a 9 percent decline in terms of deals from the third quarter of 2011. Later Stage companies attracted 33 percent of dollars and 24 percent of deals in 2011 compared to 30 percent of dollars and 23 percent of deals in 2010.
First-Time Financings
First-time financings jumped both in terms of dollars and deals from the prior year, rising to $5.0 billion going into 1,159 companies, a 12 percent increase in dollars and an 11 percent increase in deals. However, the dollar level and number of companies receiving venture capital for the first time decreased in the fourth quarter by 29 and 19 percent, respectively, over the third quarter, dropping to $920 million into 248 companies. First-time financings accounted for 18 percent of dollars and 32 percent of deals in 2011 compared to 19 percent of dollars and 30 percent of deals in 2010.
Industries receiving the most dollars in first-time financings in 2011 were Software, Biotechnology, and Media/Entertainment. Industries with the most first-time deals in 2011 were Software, Media/Entertainment, and IT Services. Fifty-one percent of first-time deals in 2011 were in the Early Stage of development followed by the Seed Stage of development at 27 percent, Expansion Stage companies at 14 percent and Later Stage companies at 9 percent.
Thursday, January 19, 2012
Investment in Buyout Funds Lifts U.S., European Private Equity Fund-Raising in 2011
U.S. private equity fund-raising regained steam after a slow third quarter, bringing the 2011 total to $122.4 billion raised for 404 funds, according to Dow Jones LP Source. This represents a slight drop in the number of funds that held closings but a 22% increase in capital from 2010, when 409 funds raised $100.5 billion. During the fourth quarter of 2011, limited partners committed $29 billion to 104 fund closings.
“The number of firms that raised $2 billion or more in 2011 increased significantly over 2010, which helped drive overall fund-raising,” said Laura Kreutzer, managing editor of Dow Jones Private Equity Analyst. “Even so, it was still a Dr. Jekyll and Mr. Hyde type of fund-raising market, with some firms hitting their fund targets and many others struggling to even get halfway to their goals. As more firms enter the fund-raising market in 2012, the gap between the haves and the have-nots promises to widen further as competition for investor attention increases.”
In Europe, the fourth quarter was the strongest of the year for fund-raising as limited partners committed $14.9 billion. For all of 2011, 140 funds raised $52.9 billion, an 8% drop in funds that raised capital but a 53% increase in capital committed.
Buyouts Funds Boost Overall Fund-Raising on Both Sides of the Atlantic
The increases in both U.S. and European private equity fund-raising can largely be attributed to strength in the buyout sector. U.S. buyout and corporate finance funds raised $86.7 billion across 175 funds in 2011, a 42% increase in capital over the previous year. Within this sector, buyout and acquisition fund-raising increased significantly as 75 funds raised $43.3 billion, more than double the 2010 total. Investment in co-investment funds also rose dramatically to $1.4 billion for 10 funds after a particularly slow year in 2010 when seven funds raised just $236 million.
In Europe, buyout and corporate finance fund-raising rose 88% to $42.1 billion in 2011. Within the sector, buyout and acquisition funds saw the biggest spike as 40 funds collected $28.4 billion, 165% more capital than the previous year.
Interest in Secondary Funds Wanes in U.S., Picks Up in Europe
U.S. funds focused on investments in the secondary market collected $5.8 billion for 20 funds in 2011, a 44% drop in capital collected from 2010. The decline follows three years of strong fund-raising for the sector, showing that general partners are more focused on investing funds than raising them.
Despite European secondary funds not closing on any capital in the fourth quarter, the fund-raising total for 2011 was up 45% over the previous year. In 2011, seven secondary funds raised $4.9 billion.
Funds-of-Funds Commitments Rebound After Record Low in U.S., Fall in Europe
Interest in U.S. funds of funds increased in 2011 as 45 funds raised $8.9 billion, a 37% increase in capital collected from the same period last year. This gain, however, follows the worst fund-raising year on record for the sector.
After two years of nearly flat fund-raising for European funds of funds, interest in the sector dropped off significantly. Seven funds of funds raised $398 million, just 10% of the total capital raised in 2010.
Strong Fourth Quarter for Venture Fund-Raising But Year-End Totals Still Lackluster
Driven by limited partners’ strong appetite for early-stage funds, U.S. venture capital fund-raising had a strong fourth quarter that pushed the full-year fund-raising total just beyond that of 2010. U.S. venture capital funds raised $16.2 billion across 135 funds in 2011, a 5% increase in capital raised despite a 12% decline in the number of funds that won commitments. Annual fund-raising, however, is now just over half the 2008 total, showing that the industry has not yet bounced back from the recession. In the fourth quarter, venture funds raised $5.2 billion, more than was raised during the second and third quarters combined.
In Europe, venture capital fund-raising set a record low as 41 funds raised $3 billion in 2011, a 20% decline in the number of funds that attracted capital and an 11% decline in capital raised compared with 2010. The fourth quarter was the strongest of the year as funds raised $991 million.
“The number of firms that raised $2 billion or more in 2011 increased significantly over 2010, which helped drive overall fund-raising,” said Laura Kreutzer, managing editor of Dow Jones Private Equity Analyst. “Even so, it was still a Dr. Jekyll and Mr. Hyde type of fund-raising market, with some firms hitting their fund targets and many others struggling to even get halfway to their goals. As more firms enter the fund-raising market in 2012, the gap between the haves and the have-nots promises to widen further as competition for investor attention increases.”
In Europe, the fourth quarter was the strongest of the year for fund-raising as limited partners committed $14.9 billion. For all of 2011, 140 funds raised $52.9 billion, an 8% drop in funds that raised capital but a 53% increase in capital committed.
Buyouts Funds Boost Overall Fund-Raising on Both Sides of the Atlantic
The increases in both U.S. and European private equity fund-raising can largely be attributed to strength in the buyout sector. U.S. buyout and corporate finance funds raised $86.7 billion across 175 funds in 2011, a 42% increase in capital over the previous year. Within this sector, buyout and acquisition fund-raising increased significantly as 75 funds raised $43.3 billion, more than double the 2010 total. Investment in co-investment funds also rose dramatically to $1.4 billion for 10 funds after a particularly slow year in 2010 when seven funds raised just $236 million.
In Europe, buyout and corporate finance fund-raising rose 88% to $42.1 billion in 2011. Within the sector, buyout and acquisition funds saw the biggest spike as 40 funds collected $28.4 billion, 165% more capital than the previous year.
Interest in Secondary Funds Wanes in U.S., Picks Up in Europe
U.S. funds focused on investments in the secondary market collected $5.8 billion for 20 funds in 2011, a 44% drop in capital collected from 2010. The decline follows three years of strong fund-raising for the sector, showing that general partners are more focused on investing funds than raising them.
Despite European secondary funds not closing on any capital in the fourth quarter, the fund-raising total for 2011 was up 45% over the previous year. In 2011, seven secondary funds raised $4.9 billion.
Funds-of-Funds Commitments Rebound After Record Low in U.S., Fall in Europe
Interest in U.S. funds of funds increased in 2011 as 45 funds raised $8.9 billion, a 37% increase in capital collected from the same period last year. This gain, however, follows the worst fund-raising year on record for the sector.
After two years of nearly flat fund-raising for European funds of funds, interest in the sector dropped off significantly. Seven funds of funds raised $398 million, just 10% of the total capital raised in 2010.
Strong Fourth Quarter for Venture Fund-Raising But Year-End Totals Still Lackluster
Driven by limited partners’ strong appetite for early-stage funds, U.S. venture capital fund-raising had a strong fourth quarter that pushed the full-year fund-raising total just beyond that of 2010. U.S. venture capital funds raised $16.2 billion across 135 funds in 2011, a 5% increase in capital raised despite a 12% decline in the number of funds that won commitments. Annual fund-raising, however, is now just over half the 2008 total, showing that the industry has not yet bounced back from the recession. In the fourth quarter, venture funds raised $5.2 billion, more than was raised during the second and third quarters combined.
In Europe, venture capital fund-raising set a record low as 41 funds raised $3 billion in 2011, a 20% decline in the number of funds that attracted capital and an 11% decline in capital raised compared with 2010. The fourth quarter was the strongest of the year as funds raised $991 million.
Strong Fourth Quarter for Venture Fund-Raising But Year-End Totals Still Lackluster
U.S. early-stage funds stage comeback in fourth quarter
European venture fund-raising sets record low
Driven by limited partners’ strong appetite for early-stage funds, U.S. venture capital fund-raising had a strong fourth quarter that pushed the full-year fund-raising total just beyond that of 2010. U.S. venture capital funds raised $16.2 billion across 135 funds in 2011, a 5% increase in capital raised despite a 12% decline in the number of funds that won commitments, according to Dow Jones LP Source. Annual fund-raising, however, is now just over half the 2008 total, showing that the industry has not yet bounced back from the recession. In the fourth quarter, venture funds raised $5.2 billion, more than was raised during the second and third quarters combined.
In Europe, venture capital fund-raising set a record low as 41 funds raised $3 billion in 2011, a 20% decline in the number of funds that attracted capital and an 11% decline in capital raised compared with 2010. The fourth quarter was the strongest of the year as funds raised $991 million.
“While brand-name firms are able to raise funds, most firms face significant challenges in fund-raising,” said Zoran Basich, editor of Dow Jones VentureWire. “Limited partners remain wary of the industry after a decade in which returns have not matched expectations. Unless that changes, limited partners are likely to stick with what they view as the tried-and-true fund managers.”
U.S. Early-Stage Funds Stage Comeback in Fourth Quarter
In the U.S., commitments to early-stage funds got a sudden boost in the fourth quarter as a handful of established firms raised funds during the final three months of the year. Early-stage funds raised $3.6 billion in the fourth quarter, making it the best quarter since 2007. For all of 2011, 83 early-stage funds raised $5.8 billion, a 14% decline in the number of funds that won commitments compared with 2010 but a 6% increase in capital raised.
Multi-stage funds started strong in 2011 by raising $4.2 billion in the first quarter, but interest quickly dropped off. For all of 2011, 37 multi-stage funds raised $5.7 billion, a 21% decline in the number of funds that raised capital and a 24% decline in capital committed from 2010.
Capital raised for later-stage funds spiked 91% in 2011 as 15 funds raised $4.7 billion.
European LPs Concentrate on Early-Stage Funds
Early-stage funds garnered most of the capital committed to European venture capital funds in 2011, raising $2.1 billion across 27 funds. This represents a 23% increase in capital committed, although the number of funds that raised capital remained flat.
Capital committed to multi-stage funds declined 45% as 13 funds raised $800 million. Capital raised by late-stage funds was halved in 2011 as one fund raised $114 million.
Tuesday, January 10, 2012
2011 Sees $1.9 Billion in Solar Venture Capital, $4 Billion in M&A
Mercom Capital Group, llc, a global clean energy communications and consulting firm, today released its annual and fourth quarter funding and merger and acquisition (M&A) activity report for the solar sector in 2011.
"Investment activity in 2011 was robust," said Raj Prabhu, managing partner of Mercom. "Whether you point to the dramatic module price declines, Europe's diminishing incentives, or the so-called 'Solyndra effect,' solar continued to gain attention and dollars for technology and innovation through venture capital funding."
Venture capital (VC) funding and M&A activity were strong in 2011, setting record numbers. Notable findings include:
* VC investment in solar totaled $1.9B (billion) in 111 deals in 2011 -- the highest number of deals ever in a single year.
* Thin-film technology raised the most VC funding ($595.5M (million)), beating downstream companies ($339M), crystalline silicon PV ($338M), concentrated solar power ($308M), and concentrated PV ($129M). Within thin-film, copper indium gallium (de)selenide (CIGS) companies were the most popular, raising $467M.
* Solar thermal power company BrightSource Energy raised $201M in Series E funding, making it the largest VC investment of 2011. Stion, a high-efficiency thin-film module manufacturer, was second with $130M. The other three top VC-funded companies were MiaSolé, Suniva and Heliovolt.
* The top VC investor was Kleiner Perkins Caufield & Byers, which completed eight transactions. There were 182 VC investors in solar in 2011.
* While Solyndra dominated headlines, over $700M of VC investment came after its bankruptcy announcement on August 31.
* Fourth quarter VC funding totaled $511M, compared to $372M in Q3.
* M&A activity was more than double that of 2010, with over $4B in 65 deals, of which only 26 were disclosed, compared to $2B in 44 deals in 2010. The largest M&A transaction was Total's 60 percent stake in SunPower for $1.4B.
"Falling panel prices and oversupply brought about a lot of consolidation activity," added Prabhu. "With valuations of publicly-traded solar companies at record lows, M&A was the go-to exit strategy."
United States led in the number of deals and VC funding, with 84 deals and $1.5B of investment. Chinese loans, credit facilities and framework agreements came to about $15.7B in ten deals, compared to $32.6B in 2010.
For a copy of Mercom's annual solar funding report and other reports, visit: http://mercomcapital.com/cleanenergyreports.php.
"Investment activity in 2011 was robust," said Raj Prabhu, managing partner of Mercom. "Whether you point to the dramatic module price declines, Europe's diminishing incentives, or the so-called 'Solyndra effect,' solar continued to gain attention and dollars for technology and innovation through venture capital funding."
Venture capital (VC) funding and M&A activity were strong in 2011, setting record numbers. Notable findings include:
* VC investment in solar totaled $1.9B (billion) in 111 deals in 2011 -- the highest number of deals ever in a single year.
* Thin-film technology raised the most VC funding ($595.5M (million)), beating downstream companies ($339M), crystalline silicon PV ($338M), concentrated solar power ($308M), and concentrated PV ($129M). Within thin-film, copper indium gallium (de)selenide (CIGS) companies were the most popular, raising $467M.
* Solar thermal power company BrightSource Energy raised $201M in Series E funding, making it the largest VC investment of 2011. Stion, a high-efficiency thin-film module manufacturer, was second with $130M. The other three top VC-funded companies were MiaSolé, Suniva and Heliovolt.
* The top VC investor was Kleiner Perkins Caufield & Byers, which completed eight transactions. There were 182 VC investors in solar in 2011.
* While Solyndra dominated headlines, over $700M of VC investment came after its bankruptcy announcement on August 31.
* Fourth quarter VC funding totaled $511M, compared to $372M in Q3.
* M&A activity was more than double that of 2010, with over $4B in 65 deals, of which only 26 were disclosed, compared to $2B in 44 deals in 2010. The largest M&A transaction was Total's 60 percent stake in SunPower for $1.4B.
"Falling panel prices and oversupply brought about a lot of consolidation activity," added Prabhu. "With valuations of publicly-traded solar companies at record lows, M&A was the go-to exit strategy."
United States led in the number of deals and VC funding, with 84 deals and $1.5B of investment. Chinese loans, credit facilities and framework agreements came to about $15.7B in ten deals, compared to $32.6B in 2010.
For a copy of Mercom's annual solar funding report and other reports, visit: http://mercomcapital.com/cleanenergyreports.php.
Monday, January 9, 2012
Venture-Backed Exit Activity Drops in 2011
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Dow Jones VentureSource: Fewer Deals Net More Capital as Median Price of M&A Spikes;
Companies Take Less Time, More Capital to Reach IPO
In 2011, fewer exits by U.S. venture-backed companies netted more capital as the median price paid for an acquisition and the median amount raised during an initial public offering (IPO) spiked. Throughout 2011, 522 mergers, acquisitions, buyouts and IPOs netted $53.2 billion, a 14% drop in deal activity and 26% increase in capital raised compared to 2010.
“Despite a slower acquisition pace capped with an uncharacteristic drop in deal activity in the fourth quarter, there are some positive signs heading into the new year. Acquisitions of companies liquidating their assets were halved in 2011 and companies are benefiting from lower start-up costs by taking capital farther toward a larger acquisition,” said Jessica Canning, global research director for Dow Jones VentureSource.
The median price paid for a company increased 77% to $71 million in 2011. To reach an M&A or buyout, companies raised a median of $17 million in venture financing, 12% less than in 2010, and took a median of 5.3 years to build their company, slightly less time than the 5.4-year median in 2010.
Companies Take Less Time, More Capital to Reach an IPO
Forty-five companies raised $5.4 billion through public offerings in 2011, significantly more capital than the $3.3 billion raised by 46 IPOs in 2010. The difference in capital raised can largely be attributed to two companies, Groupon and Zynga, which combined raised $1.7 billion through their IPOs.
“The IPO market saw some gains through the first half of the year, but the momentum was not strong enough to survive the volatility in August,” said Zoran Basich, editor of Dow Jones VentureWire. “During 2012 we’ll get a sense of whether the last two years of flat IPO activity is the new normal for the industry or if there’s room to grow.”
During the fourth quarter of 2011, 10 IPOs raised $2.4 billion. Currently, 60 U.S. venture-backed companies are in IPO registration. Thirteen of those companies filed during the fourth quarter.
The median amount of venture capital raised prior to an IPO rose 17% to $85 million in 2011. The median amount of time it took a company to reach liquidity fell to 6.5 years from 8.1 years in 2010.
Year-End Surge in M&As Absent
For the first time in five years, acquisition activity in the fourth quarter did not outpace the third quarter. During the fourth quarter, 103 M&As raised $9 billion, making it the least active quarter of the year. Throughout 2011, corporate acquirers bought 460 companies for $46.4 billion, a 13% drop in M&A activity and 30% increase in capital raised from 2010 when 528 deals netted $35.6 billion.
Buyouts of venture-backed companies by private equity firms also tracked below 2010. Private equity firms bought 17 venture-backed companies for $1.4 billion in 2011, down from the previous year when private equity firms bought 32 companies for $3.4 billion. During the fourth quarter, four buyouts netted $343 million.
Dow Jones VentureSource: Fewer Deals Net More Capital as Median Price of M&A Spikes;
Companies Take Less Time, More Capital to Reach IPO
In 2011, fewer exits by U.S. venture-backed companies netted more capital as the median price paid for an acquisition and the median amount raised during an initial public offering (IPO) spiked. Throughout 2011, 522 mergers, acquisitions, buyouts and IPOs netted $53.2 billion, a 14% drop in deal activity and 26% increase in capital raised compared to 2010.
“Despite a slower acquisition pace capped with an uncharacteristic drop in deal activity in the fourth quarter, there are some positive signs heading into the new year. Acquisitions of companies liquidating their assets were halved in 2011 and companies are benefiting from lower start-up costs by taking capital farther toward a larger acquisition,” said Jessica Canning, global research director for Dow Jones VentureSource.
The median price paid for a company increased 77% to $71 million in 2011. To reach an M&A or buyout, companies raised a median of $17 million in venture financing, 12% less than in 2010, and took a median of 5.3 years to build their company, slightly less time than the 5.4-year median in 2010.
Companies Take Less Time, More Capital to Reach an IPO
Forty-five companies raised $5.4 billion through public offerings in 2011, significantly more capital than the $3.3 billion raised by 46 IPOs in 2010. The difference in capital raised can largely be attributed to two companies, Groupon and Zynga, which combined raised $1.7 billion through their IPOs.
“The IPO market saw some gains through the first half of the year, but the momentum was not strong enough to survive the volatility in August,” said Zoran Basich, editor of Dow Jones VentureWire. “During 2012 we’ll get a sense of whether the last two years of flat IPO activity is the new normal for the industry or if there’s room to grow.”
During the fourth quarter of 2011, 10 IPOs raised $2.4 billion. Currently, 60 U.S. venture-backed companies are in IPO registration. Thirteen of those companies filed during the fourth quarter.
The median amount of venture capital raised prior to an IPO rose 17% to $85 million in 2011. The median amount of time it took a company to reach liquidity fell to 6.5 years from 8.1 years in 2010.
Year-End Surge in M&As Absent
For the first time in five years, acquisition activity in the fourth quarter did not outpace the third quarter. During the fourth quarter, 103 M&As raised $9 billion, making it the least active quarter of the year. Throughout 2011, corporate acquirers bought 460 companies for $46.4 billion, a 13% drop in M&A activity and 30% increase in capital raised from 2010 when 528 deals netted $35.6 billion.
Buyouts of venture-backed companies by private equity firms also tracked below 2010. Private equity firms bought 17 venture-backed companies for $1.4 billion in 2011, down from the previous year when private equity firms bought 32 companies for $3.4 billion. During the fourth quarter, four buyouts netted $343 million.
VENTURE CAPITAL FIRMS RAISED $5.6 BILLION IN FOURTH QUARTER
INDUSTRY CONTINUED TO CONSOLIDATE IN 2011
Thirty-eight U.S. venture capital funds raised $5.6 billion in the fourth quarter of 2011, according to Thomson Reuters and the National Venture Capital Association (NVCA). This level marks a 162 percent increase by dollar commitments but a 41 percent decline by number of funds compared to the third quarter of 2011, which saw 64 funds raise $2.1 billion during the period. This quarter marks the lowest number of funds raising money since the third quarter of 2009. U.S. venture capital fundraising for all of 2011 totaled $18.17 billion from 169 funds, a 32 percent increase by dollars compared to 2010 and with the same number of funds.
Fundraising by Venture Funds
Year/Quarter Number of Funds Venture Capital ($M)
2007 237 31,061.1
2008 212 25,932.9
2009 161 16,406.8
2010 169 13,777.8
2011 169 18,166.0
1Q'09 58 4,945.9
2Q'09 42 5,008.1
3Q'09 36 2,345.4
4Q'09 49 4,107.4
1Q'10 47 4,270.7
2Q'10 48 2,099.9
3Q'10 55 3,677.6
4Q'10 48 3,729.6
1Q'11 45 7,604.2
2Q'11 46 2,814.4
3Q'11 64 2,139.8
4Q'11 38 5,606.0
“This past year we saw more venture capital money raised by essentially the same number of firms, a sign that consolidation within the industry is continuing,” said Mark Heesen, president of NVCA. “We also continued to invest more money in companies than we raised from our investors. Both of these trends – if they continue -- suggest that the level and breadth of venture investment is starting to recalibrate to reflect a concentration of capital in the hands of fewer investors. Our cottage industry is indeed getting smaller still and that will impact the startup ecosystem over time.”
There were 29 follow-on funds and 9 new funds raised in the fourth quarter of 2011, a ratio of 3.22-to-1 of follow-on to new funds. The largest new fund reporting commitments during the fourth quarter of 2011 and for the full year was from Washington, D.C. based Revolution LLC which raised $450 million for the firm’s inaugural fund. A “new” fund is defined as the first fund at a newly established firm, although the general partners of that firm may have previous experience investing in venture capital.
VC Funds: New vs. Follow-On
No.of New-No. of Follow-on-Total
2007 59 169 228
2008 50 159 209
2009 39 122 161
2010 52 117 169
2011 49 120 169
1Q'09 10 48 58
2Q'09 13 29 42
3Q'09 12 24 36
4Q'09 11 38 49
1Q'10 13 34 47
2Q'10 17 31 48
3Q'10 20 35 55
4Q'10 15 33 48
1Q'11 12 33 45
2Q'11 15 31 46
3Q'11 21 43 64
4Q'11 9 29 38
Source: Thomson Reuters and National Venture Capital Association
Fourth quarter 2011 venture capital fundraising was lead by Menlo Park, California based Khosla Ventures which raised $1.05 billion, the firm’s largest fund to date and the fourth largest fund year-to-date. Raising $1.6 billion, Bessemer Venture Partners III was the top fund of 2011 while Sequoia Captial 2010, LP. ($1.3 billion) and J.P. Morgan Digital Growth fund ($1.2 billion) were second and third respectively.
Methodology
The Thomson Reuters/National Venture Capital Association sample includes U.S.-based venture capital funds. Classifications are based on the headquarter location of the fund, not the location of venture capital firm. The sample excludes fund of funds. Effective November 1, 2010, Thomson Reuters venture capital fund data has been updated in order to provide more consistent and relevant categories for searching and reporting. As a result of these changes, there may be shifts in historical fundraising statistics as a result of movements of funds between primary market & nation samples and/or between fund stage categories.
Tuesday, January 3, 2012
VENTURED-BACKED IPO MOMENTUM IN FOURTH QUARTER NOT ENOUGH FOR RECOVERY IN 2011
Ventured-Backed Acquisitions Activity Remained Robust for the Year
Led by several large offerings, venture-backed initial public offering (IPO) activity grew in the fourth quarter, with 11 companies going public, up 120 percent from the third quarter 2011 but down 67 percent from the fourth quarter of last year, according to the Exit Poll report by Thomson Reuters and the National Venture Capital Association (NVCA). By dollars, the quarter marked an increase of nearly five times the third quarter and a 34 percent decrease from the fourth quarter last year. For the full year, 52 venture-backed companies went public representing a value of $9.9 billion, a 31 percent decline in volume but a 41 percent increase in dollar value from 2010.
For the fourth quarter, 92 venture-backed M&A deals were reported, 26 of which had an aggregate deal value of $3.9 billion, down 34 percent from the fourth quarter of 2010. For all of 2011, 429 transactions were reported, down just two percent from a record year in 2010. Annual M&A aggregate value, driven by the first nine months of 2011 reached $23.0 billion, a 23 percent increase from 2010 and the highest levels seen since 2007.
“Despite a flurry of IPO activity at the end of 2011, the venture-backed IPO market still has a considerable way to go on the road to recovery, said Mark Heesen, president of the NVCA. “While we are encouraged by the fourth quarter momentum, we still ended the year with fewer total IPOs than in 2010 and 25 percent of those comprising foreign companies. With a full pipeline of companies in registration and pending legislation to ease the IPO path for emerging growth companies, we could see a more robust market in 2012, but only if we can achieve a reasonable degree of global economic stability. The bottom line is that we need at least double the offerings that we saw in 2011 to declare the market back on track, and that could take some time.”
IPO Activity Overview
There were 11 venture-backed IPOs valued at $2.6 billion in the fourth quarter of 2011, which represented a nearly five-fold increase in dollar value compared to the third quarter of 2011 but a 34 percent drop in dollar value from the fourth quarter of last year. Seven of the 11 IPOs of the quarter were IT-related IPOs representing 86 percent of the total amount raised in the quarter. Year-to-date, IT IPOs account for 63 percent or 33 of the year’s 52 venture-backed IPOs and 77 percent or $7.6 billion of the $9.88 billion raised in total this year. By location, 39 of the year’s 52 IPOs were by U.S.-based companies with 21 coming from the state of California. Thirteen IPOs, accounting for $3.4 billion raised came from outside the U.S., led by the Russian search firm Yandex which raised $1.3 billion in May representing the largest offering of 2011. In the largest IPO of the quarter and the largest U.S.-based company IPO of the year, online gaming company Zynga (ZNGA) raised $1.0 billion and began trading on the NASDAQ on December 16th.
Venture-Backed IPO Industry Breakdown Q4 2011
For the fourth quarter of 2011, nine companies listed on the NASDAQ stock exchange while InvenSense, Inc and Imperva, Inc listed on the New York Stock Exchange. For the full year, 35 firms listed on the NASDAQ while 17 listed on the New York Stock Exchange. On average venture-backed IPOs listed in the fourth quarter are trading 16.8 percent above their offering price. Imperva leads all listings, at 93g percent above its November 9th Page 4 of 5 January 3, 2012 offer price of $18 per share. Three of the 11 companies brought to market this quarter are currently trading below their offering price. There are 60 venture-backed companies currently filed for an initial public offering with the SEC.
Mergers and Acquisitions Overview
As of December 30th, 92 venture-backed M&A deals were reported for the fourth quarter, 26 of which had an aggregate deal value of $3.9 billion. The average disclosed deal value was $151.9 million, down 11 percent from the third quarter of 2011 but up four percent from the fourth quarter of 2010. The information technology sector led the venture-backed M&A landscape with 61 of the 86 deals of the quarter and had a disclosed total dollar value of $2.3 billion. This was down 39percent from the third quarter of 2011. Within this sector, Computer Software and Services and Internet Specific deals accounted for the bulk of the targets with 28 and 24 transactions, respectively, across these sector subsets. For 2011, average disclosed venture-backed M&A deal value was up three percent compared to the full year of 2010.
Venture-Backed M&A Industry Breakdown
In the biggest venture-backed M&A deal of the quarter, Sterling, VA-based NeuStar Inc. acquired Targus Information Corp, a Vienna, VA-based provider of caller identification services for $650 million. The largest deal of 2011 was the July 6th purchase of Broad Oak Energy by Laredo Petroleum for $1 billion. Deals bringing in the top returns, those with disclosed values greater than four times the venture investment, accounted for 58 percent of the total disclosed transactions during fourth quarter 2011, down from 70 percent in the third quarter. Venture-backed M&A deals returning less than the amount invested accounted for 31 percent of the quarterly total.
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