Venture Backed M&A Weakens In 2012

Acquisitions of venture-backed companies fell for the second year in a row in 2012, with a weak fourth quarter contributing to the retreat, according to a study by the National Venture Capital Association and Thomson Reuters, publisher of this blog.

For the year, 435 venture-funded companies were sold to acquirers, down 11% from 2011 and 17% from 2010. The fourth quarter saw 95 deals, the slowest quarter of the year and a 22% drop from a year earlier, the study found.

The softening of the M&A exit market parallels a slowing in the IPO market, where deal volume fell for the second year running.

According to the study, the average deal size rose in 2012 to $179 million, up from $143 million in 2011. The study made the calculation from the 120 deals in 2012 that disclosed their value.

It also discovered that just under a third of deals with disclosed values returned 4 times to 10 times their venture investment and about a fifth of deals returned more than 10x. Another fifth of the deals returned less than invested capital.

In the fourth quarter, the information technology sector was the most active, with 65 of the 95 deals. Software and Internet related companies were the most frequent targets.

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