April 1, 2013

Venture-Backed IPO Exits Fall To Three-Year Low

Life Sciences M&A Tops Largest Deals During First Quarter

NEW YORK – Venture-backed initial public offering (IPO) activity raised $672.0 million from eight offerings during the first quarter of 2013, a 52 percent decline in dollars raised from the fourth quarter of 2012 but on par with the number of listings during the previous quarter, according to the Exit Poll report by Thomson Reuters and the National Venture Capital Association (NVCA). The number of venture-backed IPO exits during the first quarter of 2013 fell 58 percent compared to the first quarter of last year.  For the first quarter of 2013, 77 venture-backed M&A deals were reported, 10 of which had an aggregate deal value of $984.3 million, a 73 percent decrease from the first quarter of 2012.  This marks the slowest quarter for number of disclosed deals since the first quarter of 1995, when eight disclosed deals were completed.  

"First quarter IPO and acquisitions activity is often subdued as year-end reporting and forward planning take priority, but this year political, taxation, and sequestration concerns weighed even more heavily on the exit market for emerging growth companies. Therefore, activity was especially slow," said John Taylor, head of research for NVCA. "That said, public market valuations have been up recently, 2012 financial statements are being finalized now, and quality companies tell us they are starting the process toward an exit later in the year. Despite having waited for the right opportunity to move forward, the 2013 class of companies that goes public or gets acquired will have to be solid.  Barring significantly adverse events, we expect stronger volume in the second and third quarters."

IPO Activity Overview
There were eight venture-backed IPOs valued at $672 million in the first quarter of 2013. By number of deals, quarterly volume was on par with the fourth quarter of last year but declined 58 percent compared to the number of deals listed during the first quarter of 2012.

Six of the eight IPOs of the quarter were IT-related IPOs representing 75 percent of the total issues for in the quarter. By location, all of the quarter's eight IPOs were by U.S.-based companies.

In the largest IPO of the quarter, Model N (MODN), a Redwood City, California-based provider of revenue management solutions for the life science and technology industries, raised $120 million and began trading on the New York Stock Exchange on March 19th. 

During the first quarter of 2013, five companies listed on the NASDAQ stock exchange and three companies listed on the New York Stock Exchange.

Seven of the eight companies brought to market this quarter are currently trading above their offering price. There are 25 venture-backed companies currently filed publicly for IPO with the SEC. This figure does not include confidential registrations filed under the JOBS Act, where many observers believe the majority of venture-backed companies now file.

Mergers and Acquisitions Overview
As of March 28th, 77 venture-backed M&A deals were reported for the first quarter of 2013, 10 of which had an aggregate deal value of $984.3 million. The average disclosed deal value was $98.4 million, a 23 percent decrease from the fourth quarter of 2012.

The information technology sector led the venture-backed M&A landscape with 58 of the 77 deals of the quarter and had a disclosed total dollar value of $360 million. Within this sector, Computer Software and Services and Internet Specific deals accounted for the bulk of the targets with 30 and 18 transactions, respectively, across these sector subsets. 

By disclosed value, the life sciences sector led all venture-backed merger activity, with $594.3 million in deals. The largest venture-backed M&A transaction during the quarter was in the biotechnology sector, with Illumina Inc’s $350 million purchase of Verinata Health, Inc, a Redwood City California-based developer of non-invasive tests for fetal chromosomal abnormalities. The $185 million purchase of pharmaceutical manufacturer Incline Therapeutics by Parsippany, New Jersey-based Medicines Co was the second largest M&A deal this quarter.

Deals disclosed values between one and four times the venture investment, accounted for 90 percent of the total disclosed transactions during first quarter of 2013. Venture-backed M&A deals returning less than the amount invested accounted for 10 percent of the quarterly total.

View the full press release [PDF]

Thomson Reuters

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About National Venture Capital Association

Venture capitalists are committed to funding America’s most innovative entrepreneurs, working closely with them to transform breakthrough ideas into emerging growth companies that drive U.S. job creation and economic growth. According to a 2011 Global Insight study, venture-backed companies accounted for 12 million jobs and $3.1 trillion in revenue in the United States in 2010. As the voice of the U.S. venture capital community, the National Venture Capital Association (NVCA) empowers its members and the entrepreneurs they fund by advocating for policies that encourage innovation and reward long-term investment. As the venture community’s preeminent trade association, NVCA serves as the definitive resource for venture capital data and unites its nearly 400 members through a full range of professional services. For more information about the NVCA, please visit www.nvca.org.