Dow Jones VentureSource Reports Worst Quarter Since 2003 with No IPOs
Completed, New Low for M&A Transactions; Acquirers Paying More
SAN FRANCISCO, July 1 /PRNewswire-FirstCall/ -- With the broader
economy sputtering, venture capital firms are finding it increasingly
difficult to generate returns through the sale or public listing of
portfolio companies. In the second quarter of 2008 there were no initial
public offerings (IPOs) of U.S. venture-backed companies. Moreover,
liquidity generated via mergers and acquisitions (M&As) fell to $4.7
billion with just 56 transactions completed, according to the Quarterly
U.S. Liquidity Report released today by Dow Jones VentureSource
(http://venturecapital.dowjones.com), the leading provider of venture
capital data.
"The U.S. venture capital industry is in the midst of the
second-longest IPO drought we've seen since we started tracking the
industry in 1992," said Jessica Canning, Global Research Director for Dow
Jones VentureSource. "The last completed public offering for a VC-backed
company was in March and we've seen 10 companies withdraw IPO registrations
since then. Even though there are currently 22 venture-backed companies in
IPO registration, it's clear they're in a holding pattern and waiting for
market conditions to improve."
In terms of overall liquidity, which includes both IPOs and M&As, the
second quarter's $4.7 billion marks a 47% drop from the same period last
year.
M&As: Down Across the Board
The Dow Jones VentureSource report shows that the second quarter's 56
M&As mark the fewest number of transactions completed in a quarter in at
least a decade and well below the second quarter of 2007, which saw $8.8
billion generated via 97 M&As.
While acquirers were paying a median of $55.8 million for
venture-backed companies in the second quarter last year, the median amount
paid for a venture-backed company in the most recent quarter rose 57% to
$87.6 million.
"The broader pull-back in the economy is affecting corporate spending
and is clearly impacting the number of deals in the M&A market," said Ms.
Canning. "Corporations might be out looking for venture-backed companies to
acquire but many are either doing so quietly or choosing to hold off on
entering into negotiations. The rise in the amount paid for acquisitions
demonstrates corporations' willingness to pay for companies that are
important for their growth."
Information technology (IT) companies accounted for the bulk of capital
raised via M&A in the second quarter with 41 transactions generating some
$3.3 billion in liquidity, a hefty 29% drop for the segment from the nearly
$4.6 billion raised in 61 M&A transactions during the same quarter last
year. By sector, software companies accounted for the majority of IT deal
flow with 28 M&A transactions garnering nearly $1.2 billion. The largest
deal of the quarter was Time Warner's $850 million acquisition of the San
Francisco-based online social networking company, Bebo.com.
According to the data, only six venture-backed health care companies
completed M&As in the second quarter, raising just $267.8 million, some 86%
less than the $1.9 billion raised in 16 M&As for the segment in the second
quarter of 2007.
With its nine completed M&A transactions amounting to roughly half of
last year's second quarter total of 17, the business, consumer and retail
industry accounted for $1.2 billion in liquidity, well below the $2.2
billion generated via M&As in 2Q07.
To make matters worse, it took venture capitalists more time to steer
these companies to M&A. The median number of years between initial equity
funding and exit via an M&A now stands at a record seven years. The median
amount of venture capital raised prior to liquidity remained fairly steady
at $21.3 million.
"We're at the mercy of the market right now," added Ms. Canning.
"Unfortunately, we're just going to have to wait and see if the liquidity
markets recover in the second half of the year."
For more information or to request a demonstration of Dow Jones
VentureSource, visit http://venturecapital.dowjones.com or call
866-291-1800.
The investment figures included in this release are based on aggregate
findings of Dow Jones VentureSource's proprietary U.S. research. This data
was collected by surveying professional venture capital firms, through
in-depth interviews with company CEOs and CFOs, and from secondary sources.
These venture capital statistics are for equity investments into
early-stage, innovative companies and do not include companies receiving
funding solely from corporate, individual, and/or government investors. No
statement herein is to be construed as a recommendation to buy or sell
securities or to provide investment advice.
About Dow Jones
Dow Jones & Company (http://www.dowjones.com) is a subsidiary of News
Corporation (NYSE: NWS, NWS.A; ASX: NWS, NWSLV; http://www.newscorp.com). Dow
Jones is a leading provider of global business news and information
services. Its Consumer Media Group publishes The Wall Street Journal,
Barron's, MarketWatch and the Far Eastern Economic Review. Its Enterprise
Media Group includes Dow Jones Newswires, Factiva, Dow Jones Client
Solutions, Dow Jones Indexes and Dow Jones Financial Information Services.
Its Local Media Group operates community-based information franchises. Dow
Jones owns 50% of SmartMoney and 33% of Stoxx Ltd. and provides news
content radio stations in the U.S.
For more information:
Daria Hall
Walek & Associates
(212) 590-0534
dhall@walek.com
SOURCE Dow Jones & Company
 back to top
Related links:
http://venturecapital.dowjones.com
http://www.dowjones.com
CONTACT:
Daria Hall of Walek & Associates,
+1-212-590-0534, dhall@walek.com, for Dow Jones & Company
|
