IPO, M&A Boosting Venture Capital Fortunes

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Venture capital industry is seeing a return of the good times — at least from an Merger & Acquisitions (M&A) and Initial Public Offering (IPO) perspective. According to data released by National Venture Capital Association (NVCA), during the third quarter 2010, there were 104 mergers and 14 IPOs of venture-backed companies. This trend is going to continue right through the end of 2010, NVCA said.

We agree; the recent acquisitions of 3PAR and Blade Technologies are a good indication that large companies in the IT sector are loosening their purse strings. While only 27 companies disclosed the value of their M&A deals, giving the total disclosed value at around $3.84 billion, it’s the IPO market which is encouraging: $1.25 billion raised from 14 deals, with each offering worth $89.2 million.

Here are some stats:

  • Of the 14 IPO exits, eight were from the information technology sector and accounted for $750 million of the total, with Sequoia Capital-based GreenDot Corp. being the biggest, having raised $164 million.
  • IT sector in total accounted for 82 deals with a total dollar value of $1 billion.
  • Internet and computer software accounted for the most deals: 32 and 33 respectively.
  • Of the total 27 M&A deals with full financial details, five had a transaction value of 10x the venture dollars invested, four deals got a value at 4 times the dollars invested, and seven were below investment levels. Eleven deals had a transaction value of between 1 and 4 times the total venture investment.

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