Venture Backed Exits - Q4 2008

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Venture Backed Exits - Q4 2008

  1. 1. CONTACTS Emily Mendell Joseph Christinat NVCA Thomson Reuters 1.610.565.3904 1.646 223 6798 emendell@nvca.org joe.christinat@thomsonreuters.com GLOBAL ECONOMIC CRISIS WEIGHS HEAVILY ON VENTURE-BACKED EXITS IN 2008 IPO Exits at 30 Year Low, M&A Activity Slows New York, New York, January 2, 2009 – Venture-backed company exits continued to lag in the fourth quarter of 2008, according to the Exit Poll report by Thomson Reuters and the National Venture Capital Association (NVCA). There were no venture-backed IPOs in the quarter, and the tally of M&A exits as of the last day of the quarter came to a modest 37 transactions for the period. Full-year 2008 brought just six IPO exits, the fewest annual venture-backed offerings since 1977, when there were also six IPO exits. Preliminary full- year M&A figures show 260 transactions in 2008, the first year since 2003 when there were less than 300 venture-backed acquisitions. quot;The most significant impact of the US financial crisis on the venture capital industry has clearly taken place in the exit markets,” said Mark Heesen, president of the NVCA. “The inability of our strongest companies to go public and the softening of acquisitions activity continue to have a major ripple effect that now reaches every stage of the venture investment lifecycle. As a result, new investments and fundraising will slow considerably in 2009 until the exit markets re-open and the pipeline is cleared. The venture community is poised and ready to bring the next generation of great companies to the capital markets and strategic buyers and, as we have done historically, contribute substantially to economic growth and innovation.quot;
  2. 2. Page 2 of 5 January 2, 2009 Venture-Backed Liquidity Events by Year/Quarter, 2002-2008 *Total M&A Disclosed *Average Total Average Deals with M&A Offer IPO Offer Total M&A M&A Disclosed Value Deal Size **Number Amount Amount Quarter/Year Values ($M) ($M) of IPO's ($M) ($M) Deals 2002 319 154 7,586.7 49.3 22 2,109.1 95.9 2003 284 119 7,460.1 62.7 29 2,022.7 69.8 2004 346 187 15,919.6 85.1 94 11,378.0 121.0 81 45 4,351.9 96.7 10 720.7 72.1 2005-1 81 34 4,725.0 139.0 10 714.1 71.4 2005-2 102 48 5,739.5 119.6 19 1,458.1 76.7 2005-3 87 39 2,594.0 66.5 18 1,592.1 88.5 2005-4 2005 351 166 17,410.6 104.9 57 4,485.0 78.7 107 52 5,607.5 107.8 10 540.8 54.1 2006-1 106 40 4,018.5 100.5 19 2,011.0 105.8 2006-2 94 42 3,450.8 82.2 8 934.2 116.8 2006-3 63 26 5,616.8 216.0 20 1,631.1 81.6 2006-4 2006 370 160 18,693.6 116.8 57 5,117.1 89.8 83 29 4,540.3 156.6 18 2,190.6 121.7 2007-1 86 36 3,972.3 110.3 25 4,146.8 165.9 2007-2 103 52 10,810.0 207.9 12 945.2 78.8 2007-3 88 43 9,084.1 211.3 31 3,043.8 98.2 2007-4 2007 360 160 28,406.7 177.5 86 10,326.3 120.1 73 30 3,929.4 131.0 5 282.7 56.6 2008-1 72 22 4,154.0 188.8 0 0.0 0.0 2008-2 78 29 3,741.1 129.0 1 187.5 187.5 2008-3 37 15 2,090.9 139.4 0 0.0 0.0 2008-4 2008 260 96 13,915.4 145.0 6 470.2 78.4 Thomson Reuters & National Venture Capital Association *Only accounts for deals with disclosed values **Includes all companies with at least one U.S. VC investor that trade on U.S. exchanges, regardless of domicile. IPO Activity Overview There were no venture-backed IPOs in the fourth quarter of 2008, the second quarter of the year with no activity. The last year there were two quarters without any IPO activity was 1975, when both the first and fourth quarters had zero exits. By dollar volume, total
  3. 3. Page 3 of 5 January 2, 2009 IPO proceeds in 2008 reached $470.2 million, the lowest value since 1979 with $339.7 million. Echoing domestic trends, no companies that received US venture financing went public on foreign exchanges in the fourth quarter. As of December 31, 2008, five of the six venture-backed companies that went public during 2008 were trading below their offering price. Twenty-eight venture-backed companies are currently filed for an initial public offering with the SEC. This level falls short of 3Q 2008 when 38 venture-backed companies were in registration. There were 40 venture-backed IPOs withdrawn from registration in 2008. For the full-year period, four venture-backed IPO exits totaling $221.0 million in proceeds came from Life Sciences issuers. The remaining IPOs came from Information Technology companies and accounted for a combined $249.3 million. The largest IPO of the year was the $187.5 million issue by web hosting provider Rackspace Hosting in August. Mergers and Acquisitions Overview As of December 31, 2008, 37 venture-backed M&A deals were reported for the fourth quarter, 15 of which had an aggregate deal value of $2.1 billion. The average disclosed deal value was $139.4 million. The Information Technology sector dominated the venture-backed M&A landscape, with 30 deals and a disclosed total dollar value of $972.2 million. Within this sector, Internet Specific companies accounted for the bulk of the target companies, with 11 transactions across this sector subset. Life Sciences saw the next highest level of activity with four deals and a combined disclosed value of $173.7 million. Finally, Non-High Technology deals accounted for three exits with disclosed values of $945 million. For full-year 2008, Information Technology transactions accounted for the majority of M&A exits and volume, with 190 transactions and disclosed aggregate values of $8.3 billion, or 60 percent of the total. Non-High Technology and Life Sciences followed with 25 percent ($3.4 billion) and 15 percent ($2.2 billion), respectively.
  4. 4. Page 4 of 5 January 2, 2009 Venture-Backed M&A Industry Breakdown Q4 2008 Number of Total Venture- Number Backed Disclosed Venture- of M&A Backed Venture- deals Backed with a Deal Value M&A disclosed Industry ($M) deals value Communications and Media 2 1 180.0 Internet Specific 11 5 320.7 Computer Software and Services 10 3 392.2 Semiconductors/Other Elect. 5 1 60.0 Computer Hardware 2 1 19.3 Information Technology TOTAL 30 11 972.2 Medical/Health 4 3 173.7 Life Sciences TOTAL 4 3 173.7 Other Products 2 1 945.0 Consumer Related 1 0 0.0 Non-High Technology TOTAL 3 1 945.0 TOTAL 37 15 2,090.9 Source: Thomson Reuters & National Venture Capital Association The largest transaction of the quarter was the acquisition of online payment and marketing technology solutions provider Bill Me Later by eBay. The transaction, valued at $945.0 million, was completed in November. In the largest transaction of the year, EqualLogic, Inc, a developer of storage area network solutions, was purchased by Dell, Inc. for $1.4 billion in January. Deals bringing in the top returns, those with disclosed values greater than four times the venture investment, accounted for 43 percent of the total in the fourth quarter of 2008, slightly lower than in the third quarter when these deals accounted for 45 percent. Those deals returning less than the amount invested accounted for 21 percent of the quarter’s total, compared to 24 percent of the total last quarter. For 2008, 46 percent of M&A transactions returned more than four times the venture investment, compared to 41 percent in full-year 2007. Twenty-eight percent of the deals in 2008 had transaction values less than the venture investment, compared to 2007 when 23 percent of the deals were valued at less than the venture investment.
  5. 5. Page 5 of 5 January 2, 2009 Analysis of Transaction Values versus Amount Invested Relationship between transaction value and Q308 Q408 2007 2008 investment M&A** M&A** M&A** M&A** Deals where transaction value is less than total 7 3 34 24 venture investment Deals where transaction value is 1-4x total 9 5 55 23 venture investment Deals where transaction value is 4x-10x total 9 4 32 26 venture investment Deals where transaction value is greater than 4 2 29 14 10x venture investment Total Disclosed Deals 29 14 150 87 Source: Thomson Reuters & National Venture Capital Association ** Disclosed deals that do not have a disclosed total investment amount are not included. About Thomson Reuters Thomson Reuters is the world’s leading source of intelligent information for businesses and professionals. We combine industry expertise with innovative technology to deliver critical information to leading decision makers in the financial, legal, tax and accounting, scientific, healthcare and media markets, powered by the world’s most trusted news organization. With headquarters in New York and major operations in London and Eagan, Minnesota, Thomson Reuters employs more than 50,000 people in 93 countries. Thomson Reuters shares are listed on the New York Stock Exchange (NYSE: TRI); Toronto Stock Exchange (TSX: TRI); London Stock Exchange (LSE: TRIL); and Nasdaq (NASDAQ: TRIN). For more information, go to www.thomsonreuters.com. About National Venture Capital Association The National Venture Capital Association (NVCA) represents approximately 460 venture capital firms in the United States. NVCA's mission is to foster greater understanding of the importance of venture capital to the U.S. economy and support entrepreneurial activity and innovation. According to a 2007 Global Insight study, venture-backed companies accounted for 10.4 million jobs and $2.3 trillion in revenue in the United States in 2006. The NVCA represents the public policy interests of the venture capital community, strives to maintain high professional standards, provides reliable industry data, sponsors professional development, and facilitates interaction among its members. For more information about the NVCA, please visit www.nvca.org.

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