Venture M&A and IPO Market Activity Drops as 2012 Ends
Dow Jones VentureSource: M&As Sees Fewest Exits since 2009; IPOs Raise Largest Amount since 2000 Despite Decrease in Deals
NEW YORK – Despite positive signs in the first half of 2012 for initial public offerings (IPOs) of venture-backed companies in the U.S., both IPOs and mergers and acquisitions (M&As) of venture-backed companies ended the fourth quarter down from the same quarter last year. During 2012, 483 mergers, acquisitions, buyouts, and IPOs raised $51.5 billion, a 19% decrease in deal activity and 7% decrease in the overall amount raised from the 594 exits in 2011.
'At the beginning of 2012, IPO deal activity increased dramatically as companies sought to capitalize on the blockbuster potential surrounding the Facebook IPO,' said Maryam Haque, senior research analyst for Dow Jones VentureSource. 'As Facebook's performance underwhelmed investors, enthusiasm appears to have turned into caution in the IPO market. Exits dropped 19% in the fourth quarter compared to last year.'
In the fourth quarter of 2012, 121 exits raised $10.6 billion, a decrease in activity from the 149 exits that raised $12.6 billion a year ago.
IPOs Raise Most Capital since 2000; Business & Financial Services Industry Dominates
Fifty venture-backed companies raised a record $11.2 billion through public offerings in 2012, the most since 2000 and a 109% increase from $5.4 billion raised by 46 IPOs in 2011. The increase in capital can be attributed to Facebook Inc.'s second quarter IPO, which was the largest of the year and accounted for 61% of the $11.2 billion.
Business and financial services proved the most active industry in 2012 with 11 IPOs raising $1.4 billion, a 175% increase in the number of IPOs and a 221% increase in capital raised in 2011. Two companies in the business support services sector took the top spot for the fourth quarter: Workday Inc. and LifeLock Inc.
'Public-market investors have shifted away from consumer-focused Web companies in recent months,' said Zoran Basich, editor of Dow Jones VentureWire. 'Enterprise software companies with solid revenue models have become more attractive, especially as some of those companies have performed very well in their debuts.'
Eight IPOs raised $1.2 billion in the fourth quarter, a 48% decrease from the $2.4 billion raised by 10 IPOs in the same quarter last year. Twenty-six U.S. venture-backed companies are currently in IPO registration, two of which filed in the fourth quarter.
The median amount of time it took a company to reach an IPO increased 16% to 7.4 years in 2012 from 6.4 years in 2011, while the median amount of venture capital raised prior to liquidity dropped 5% to $78.4 million in 2012.
M&As Struggle throughout Year, Seeing Fewest Exits since 2009
Acquisition activity declined in 2012, ending with the fewest exits since 2009. Throughout 2012, 403 M&As raised $37.4 billion, a 24% decrease in M&A activity and a 23% decrease in capital raised since 528 M&As garnered $48.4 billion in 2011.
Healthcare companies accounted for six of the top 10 M&As for the fourth quarter of 2012, though the healthcare industry represented just 15% of this year's M&A activity with 66 U.S. ventured-backed companies acquired.
The largest M&A of the year was Liberty Dialysis LLC, which was acquired by Fresenius Medical Care AG & Co. KGaA for $1.7 billion. Cisco Systems Inc.'s $1.2 billion acquisition of Meraki Inc. was the largest acquisition of the fourth quarter and the second largest of the year.
Buyouts of venture-backed companies by private equity firms ended on a more positive note, with 30 companies acquired for $2.9 billion in 2012, a 50% increase in number of exits from 2011 when 20 companies were purchased for $1.4 billion.
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