VCJ Year in Review: Trade Sales Slow in 2012

Large technology acquirers had plenty of money to spend last year. But for the most part, they weren’t using it to buy venture-backed companies.

Fewer VC-funded companies sold to strategic acquirers in 2012 than in 2011, according to preliminary data for announced and completed deals from Thomson Reuters (publisher of VCJ and peHUB). As of mid-December, there were just over 551 such transactions, down from more than 680 in all of 2011.

Acquirers appeared to spending less as well. The total value of purchases with disclosed valuations last year was about $30.7 billion as of mid-December, compared to $35.3 billion in all of 2011.

Overall, 2012 M&A spending was probably much higher, since most acquirers did not publicly reveal purchase prices. However, the year-over-year drop in the disclosed total indicates spending likely fell across-the-board last year, led by a decline in tech M&A.

“The buyers are much more cautious,” Joe Steger, head of Global M&A at Ernst & Young, tells VCJ in the Year in Review issue.

Steger says the poor performance of social media offerings fueled acquirers’ reluctance to open their checkbooks.

Among VC-backed companies, the M&A slowdown was particularly pronounced in the IT space. As of mid-December, there were just over 300 computer-related M&A transactions involving venture-backed companies, according to Thomson Reuters, compared to more than 350 in 2011. The total value of disclosed deals, meanwhile, was just under $10 billion, compared to $13.7 billion in 2011.

VCJ subscribers can read more about the year’s M&A activity by clicking here. The story includes a sector-by-sector breakdown of M&A dealmaking in 2011 and 2012, focusing on deal volume, disclosed deal value and time to exit. We also zero in on the largest venture-backed acquisitions of the year, with one table looking at the largest up-front payments and another looking at the largest deals with combined upfront and milestone-based payments.

Photo of Kevin Systrom, CEO of Instagram, which was bought by Facebook for $1 billion in 2012, by REUTERS/Philippe Wojazer.

1 Comment

  • Not surprising at all.

    Many VC’s have written up the valuations on their holdings to silly levels, hoping to get those prices when it comes time to sell. Generally, the public markets are better at assessing the TRUE value of the asset. leaving ego and whimsy aside for pragmatic valuation systems.

    “Pigs get fed, but hogs go to slaughter”

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