Venture Exits Q1 '07

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Venture Exits Q1 '07

  1. 1. Channa Luma, The Weiser Group for NVCA, 302-368-2345, cluma@weisergroup.com Matthew Toole, Thomson Financial, 646-822-7560, matthew.toole@thomson.com VENTURE-BACKED IPOs MAKE GAINS; ACQUISITION ACTIVITY DECLINES IN Q1 2007 Information Technology Companies Drive Exit Activity New York, NY- April 2, 2007 – Seventeen venture-backed companies raised $2.09 billion through initial public offerings (IPOs) on US exchanges in the first quarter of 2007, according to the Exit Poll report by Thomson Financial and the National Venture Capital Association (NVCA). This volume represents a 70 percent increase from the first quarter of 2006 when ten venture-backed companies went public. Venture- backed merger and acquisition activity declined significantly with only 62 transactions completed this quarter compared to 104 in the first quarter of 2006. However, the average disclosed deal size for the first quarter of 2007 was $161.2 million, one of the highest quarters in the last five years.. “This quarter may mark a subtle shift in the exit mix for venture capital,” said Mark Heesen, president of the National Venture Capital Association. “There appears to be a crack in the IPO window which changes the psychology of the market. In recent quarters, an IPO has not been a viable option for most of these companies. However, the increase in venture-backed IPO registrations is an encouraging sign. At the same time, large corporations have slowed their acquisition pace, likely because of stock market uncertainty and earnings pressure. This all means fewer, but higher quality acquisitions as evidenced by the numbers.quot; Venture-Backed Liquidity Events, 2001-2007ytd *Total M&A Disclosed *Average Total Average Deals with M&A M&A Offer IPO Offer Total Disclosed Deal Size Amount Amount M&A Value **Number Quarter/Year Deals Values ($M) ($M) of IPOs ($M) ($M) 2001 353 165 16,798.9 101.8 41 3,489.9 85.1 2002 318 152 7,916.4 52.1 22 2,109.1 95.9 2003 291 123 7,726.1 62.8 29 2,022.7 69.8 80 45 3,921.0 87.1 13 2,721.1 209.3 2004-1 89 48 4,514.6 94.1 29 2,077.8 71.7 2004-2 86 47 4,142.8 88.2 24 3,225.6 134.4 2004-3 84 46 2,862.2 62.2 27 2,990.4 110.8 2004-4 2004 339 186 15,440.6 83.0 93 11,014.9 118.4 82 46 4,364.9 94.9 10 720.7 72.1 2005-1 80 36 4,791.0 133.1 10 714.1 71.4 2005-2 98 47 4,374.8 93.1 19 1,458.1 76.7 2005-3 87 39 2,563.7 65.7 17 1,568.1 92.2 2005-4 2005 347 168 16,094.4 95.8 56 4,461.0 79.7 104 48 5,384.4 112.2 10 540.8 54.1 2006-1 92 37 3,747.6 101.3 19 2,011.0 105.8 2006-2 87 39 3,726.3 95.6 8 934.2 116.8 2006-3
  2. 2. 57 23 3,801.8 165.3 20 1,631.1 81.6 2006-4 2006 340 147 16,660.0 113.3 57 5,117.1 89.8 62 20 3,223.3 161.2 17 2,091.9 123.1 2007-1 2007 62 20 3,223.3 161.2 17 2,091.9 123.1 Thomson Financial & 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 Nine IPOs in the technology sector comprised nearly 67 percent of the total amount raised in the U.S. markets during the first quarter of 2007, bolstered by the $600 million offering from Washington-based Clearwire Corporation – the largest venture-backed IPO since October 2004. The wireless internet service provider listed 12 million shares on NASDAQ for $25 per share via bookrunners Merrill Lynch, Morgan Stanley and JP Morgan. Venture investors in Clearwire include CIC Partners, Convergent Investors, The Edgewater Funds, Goldman Sachs, Intel Capital, Liberty Associated Partners and Pharos Investment Group. Activity in the Life Sciences sector saw seven IPOs come to market raising $600.4 million during the first quarter. The largest IPO in the sector was the $288 million offering from Accuray, a California-based surgical equipment manufacturer. Led by JP Morgan and UBS, the 16 million share listing was priced at $18 per share, and has increased nearly 27% over its initial offer price. Venture investors in Accuray include Marubeni Corporation and several undisclosed funds. Industry Breakdown Q1 2007 *Number Total of Venture- Venture- Backed Backed Offering IPO's in Industry the U.S. Size ($M) Internet Specific 4 942.1 Communications/Media 2 227.1 Computer Software 1 86.6 Semiconductors 2 135.7 Technology TOTAL 9 1,391.5 Medical/Health 5 480.4 Biotechnology 2 120 Life Sciences TOTAL 7 600.4 Other Products 1 100.0 Other TOTAL 1 100.0 TOTAL 17 2091.9 *Includes all companies with at least one U.S. VC investor that trade on U.S. exchanges, regardless of domicile Of the venture backed companies that went public during the rolling twelve month period, 70% were trading at or above their offering price as of March 29, 2007.
  3. 3. Forty-four venture-backed companies have filed for an initial public offering with the SEC since 2005 and are currently “in registration”. The venture-backed pipeline totals compare very favorably to the 24 companies in registration at the end of the first quarter of 2006. “The mostly positive aftermarket performance of venture-backed offerings and the strong IPO pipeline over the past twelve months indicates the quality of the companies going through the exit process”, said Alex Tan, Global Private Equity Research Manager at Thomson Financial. In addition to the US market activity, Norwegian pharmaceutical concern, Algeta ASA listed on the Oslo Stock Exchange and was the only US-backed venture-backed company to go public on a non-US exchange during the first quarter. Merger and Acquisition Overview Although up slightly from fourth quarter of 2006, the first quarter venture-backed M&A volume of 62 transactions fell sharply from last year at this time. However, the average disclosed deal size was $161.2 million, the second highest quarterly average since 2001. The Technology sector dominated the venture-backed M&A landscape, with 51 deals and a disclosed value of nearly $2.0 billion. Within Technology, the Computer Software and Internet Specific sectors each saw 18 transactions. The Internet Specific sector reached $1.1 billion in disclosed deal value – 54 percent of the overall value within technology. Four Life Sciences companies were acquired, with a disclosed deal value of $1.0 billion. Venture-Backed M&A Industry Breakdown Q1 2007 Number of Total Venture- Disclosed Number of Backed Venture- M&A Backed Venture- deals with Deal Backed a disclosed Value M&A Industry deals value ($M) Communications/Media 8 5 173.4 Internet Specific 18 4 1052.9 Computer Software 18 5 460 Semiconductors 3 1 270.0 Computer Hardware 4 0 0.0 Technology TOTAL 51 15 1,956.3 Medical/Health 3 1 525.0 Biotechnology 1 1 480.0 Life Sciences TOTAL 4 2 1005.0 Consumer Related 2 0 0.0 Industrial/Energy 1 1 90.0 Other Products 4 2 172.0 Other TOTAL 7 3 262.0 TOTAL 62 20 3,223.3 Source: Thomson Financial & National Venture Capital Association
  4. 4. The largest disclosed deal of the quarter was the $564 million acquisition of foreign-exchange portal operator Currenex Inc by State Street Corporation in March. The second largest deal was the $525 million acquisition of surgical equipment developer St. Francis Medical Technologies by Kyphon Inc. Deals bringing in the top returns, those with disclosed values greater than 4x the venture investment, accounted for 50% of the total compared to 65% last quarter. Conversely, those deals returning less than the amount invested accounted for 25% of the quarter’s total, down from 28% of the total last quarter. Analysis of Transaction Values versus Amount Invested Relationship between transaction value and M&A** investment Deals where transaction value is less than total 5 venture investment Deals where transaction value is 1-4x total 5 venture investment Deals where transaction value is 4x-10x total 5 venture investment Deals where transaction value is greater than 5 10x venture investment Total Disclosed Deals 20 Source: Thomson Financial & National Venture Capital Association ** Disclosed deals that did not have a disclosed total investment amount are not included. About Thomson Financial Thomson Financial, with 2006 revenues of US$2 billion, is a provider of information and technology solutions to the worldwide financial community. Through the widest range of products and services in the industry, Thomson Financial helps clients in more than 70 countries make better decisions, be more productive and achieve superior results. Thomson Financial is part of The Thomson Corporation (www.thomson.com), a global leader in providing essential electronic workflow solutions to business and professional customers. With operational headquarters in Stamford, Conn., Thomson provides value-added information, software tools and applications to professionals in the fields of law, tax, accounting, financial services, scientific research and healthcare. The Corporation's common shares are listed on the New York and Toronto stock exchanges (NYSE: TOC; TSX: TOC). The National Venture Capital Association (NVCA) represents approximately 480 venture capital and private equity firms. 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 2006 Global Insight study, venture-backed companies accounted for 10 million jobs and $2.1 trillion in revenue in the United States in 2005. 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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