Venture-backed IPO activity gathered momentum in the third quarter with 26 deals raising $2.7 billion, according to a report by peHUB publisher Thomson Reuters and the National Venture Capital Association. It was a 13% increase from the second quarter in deal flow and an 11% increase in dollars. The largest deal in the quarter was FireEye, which raised $349 million.
Together, the second and third quarters were the first consecutive quarters to see 20 or more venture-backed IPOs since the fourth quarter of 2004.
However, venture-backed M&A activity remained soft, with 107 deals reported. The aggregate value of the 31 deals which disclosed deal size was $4.9 billion, up 45% from the second quarter.
VENTURE-BACKED IPO EXIT ACTIVITY KEEPS MOMENTUM IN Q3 2013 WITH FIRST CONSECUTIVE QUARTERS OF 20+ OFFERINGS SINCE 2004
Strongest Quarter for M&A Disclosed Value since Q3 2012
New York, New York, October 1, 2013 – Twenty-six venture-backed initial public offerings (IPOs) raised $2.7 billion during the third quarter of 2013, a 13 percent increase from the second quarter of this year and an 11 percent increase, by dollars, compared to the previous quarter according to the Exit Poll report by Thomson Reuters and the National Venture Capital Association (NVCA). This quarter also marked the first consecutive quarter to see 20 or more venture-backed IPOs since the fourth quarter of 2004. For the third quarter of 2013, 107 venture-backed M&A deals were reported, 31 of which had an aggregate deal value of $4.9 billion. This represents a 45 percent increase in disclosed value from the second quarter of this year and marks the strongest quarter for M&A disclosed value since the third quarter of 2012.
“While the number of M&A deals this quarter remains below recent run rates, the jump in the value of the deals from Q2 2013 is encouraging. This is an indication that venture- backed companies – particularly in IT – are attracting increased interest from strategic buyers, weighing all options, and holding out for better terms,” said John Taylor, head of research for NVCA. “On the IPO side, favorable public market conditions and stronger valuations are contributing to better quality IPOs for venture-backed companies as evidenced by the jump in dollars raised on the public markets. However, we are still well below ideal levels as VCs are still investing at greater rates than they are exiting those investments. While many venture-backed companies are opting for confidential registration filing, venture capitalists are telling us that they have a number of companies moving toward a public offering in the next quarter or two.”IPO Activity Overview
There were 26 venture-backed IPOs valued at $2.7 billion in the third quarter of 2013. By number of deals, quarterly volume increased 13 percent from the second quarter of this year but registered an 11 percent increase, by dollars, compared to the previous quarter. Excluding the record $16.0 billion Facebook IPO, the third quarter of 2013 marks the strongest quarter for dollars raised by venture-backed companies since the fourth quarter of 2011.
Led by the biotechnology sector, 16 of the 26 offerings during the quarter were Life Sciences IPOs, representing 62 percent of the total issues for the quarter. With 14 biotechnology offerings in the third quarter, this marks the second consecutive quarter for double-digit listings in the sector since the third quarter of 2000.
By location, 24 of the quarter’s 26 IPOs were from U.S.-based companies. Montage Technology Group Limited, a Shanghai, China-based developer of mixed-signal integrated circuits, raised $71 million on the NASDAQ stock exchange on September 25th, the largest non-U.S. offering of the quarter.
In the largest IPO of the quarter, FireEye, Inc. (FEYE), a California-based global security network company, raised $349 million and began trading on the NASDAQ on September 19th. The company is currently trading at more than twice its $20 offering price.
During the third quarter of 2013, 21 companies listed on the NASDAQ stock exchange and five companies listed on the New York Stock Exchange. Thirteen of this quarter’s 14 biotechnology IPOs listed on the NASDAQ stock exchange.
Twenty-two of the 26 companies brought to market this quarter are currently trading at or above their offering price. There are 44 venture-backed companies currently filed publicly with the SEC for IPO. 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 September 30th, 107 venture-backed M&A deals were reported for the third quarter of 2013, 31 of which had an aggregate deal value of $4.9 billion, the strongest quarter by disclosed deal value since the third quarter of 2012. The average disclosed deal value was $157.4 million, a 21 percent decrease compared to the second quarter of 2013.
The information technology sector led the venture-backed M&A landscape with 78 of the 107 deals of the quarter and had a disclosed total dollar value of $2.6 billion. Within this sector, Computer Software and Services and Internet Specific deals accounted for the bulk of the targets with 40 and 25 transactions respectively across these sector subsets.
The largest venture-backed M&A transaction during the third quarter was in the biotechnology sector, with Johnson & Johnson’s $650 million purchase of Aragon Pharmaceuticals, a San Diego, California-based developer of anti-endocrine therapies. AOL’s $465 million acquisition of San Mateo, California-based Adap.tv, Inc., an online video advertising service, ranked as the second largest venture-backed M&A deal during the quarter.
Deals bringing in the top returns, those with disclosed values greater than four times the venture investment, accounted for 41 percent of the total disclosed transactions during third quarter of 2013, on par with the second quarter of this year. Venture-backed M&A deals returning less than the amount invested accounted for 21 percent of the quarterly total.
Analysis of Transaction Values versus Amount Invested
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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. 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.