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Prices paid for venture-backed US M&A deals reach $27.33bn in 2005, highest aggregate total since 200030/05/2006. Source: VentureOne.
 US venture-backed companies claimed higher prices in mergers and acquisitions in 2005, with an aggregate $27.33bn paid in 356 transactions, the highest total amount paid in a single year since 2000 when 458 M&As were acquired for $98.10bn according to VentureOne's Quarterly Liquidity Report.
While the number of acquisitions are down slightly from 2004-when 407 U.S.-based venture-backed companies were acquired-the aggregate amount paid has increased from last year's total of $23.40 billion by 17%. The median amount paid for an acquired company in 2005 was $47.5 million, up from $39.3 million last year. The median amount invested in these companies prior to acquisition was $23 million, up from $20 million last year.
"The year 2005 proved to be a strong year for venture-capital backed companies, particularly those in the information technology industry, to exit via an acquisition. These IT companies represented 221 of the M&As that occurred this year with the total amount paid for them reaching $11.73 billion," said John Gabbert, managing director of private markets for Dow Jones. "But venture-backed health-care companies also proved popular with acquiring companies, representing 71 of the year's acquisitions and $9.42 billion of the total paid - the largest aggregate amount paid for acquired health-care companies since at least 1998."
In the fourth quarter alone, 77 U.S.-based venture-backed companies were acquired, with the quarterly amount paid reaching an aggregate $4.18 billion, making it the slowest quarter for M&A deals this year. That compares to 100 acquisitions and $4.81 billion paid in the fourth quarter a year ago. The median amount paid in mergers & acquisitions (M&A) in the fourth quarter increased only slightly from last year, to reach $30.5 million, from $29.6 million in the fourth quarter of 2005.
Meanwhile, the number of initial public offerings (IPOs) of U.S. venture-backed companies reached 41 this year, with 12 of them occurring in the fourth quarter, making it the second most active quarter for IPOs in 2005. The total amount raised by the companies in those IPOs was $2.24 billion in 2005, which is less than half the $4.98 billion that venture-backed IPO companies raised in 2004. The fourth quarter alone was responsible for $696.9 million, a decrease from the $1.20 billion raised by 19 IPO companies in the fourth quarter of 2004.
"While the number of exits in the public markets declined from a year ago, there were still more venture-backed IPOs in the U.S. in 2005 raising more capital, than there were in the years 2001, 2002 or 2003," said Steve Harmston, director of global research for VentureOne.
The IPOs continued to be dominated by health-care companies, which represented 21 of the total year's public market exits and $1.0 billion of the year's capital. In the fourth quarter, health care IPOs numbered five and raised $191.2 million. Five IT companies also completed IPOs in the fourth quarter- raising $334.2 million-making this the most successful quarter for IT IPOs in more than a year. Two products-and-services companies also completed IPOs, raising $171.5 million in the fourth quarter.
The overall median amount invested prior to IPO was $52 million for the year. This is the lowest annual median since 2002. The median premoney valuation of the IPO companies in 2005 was $166.7 million, down from $223.8 million last year. The median time for companies to go from initial equity financing to IPO was 5.6 years in 2005, slightly down from 5.7 years last year.
The largest IPO of the year, and in the fourth quarter, was Under Armour (Nasdaq: UARM) of Baltimore, MD. The sportswear manufacturer raised $123.5 million for the company in its Nov. 18 IPO.
The M&A industry breakdown in the fourth quarter included 47 information-technology (IT) companies, 16 health-care companies and 12 products-and-services companies. The median amount paid for an IT company in the fourth quarter was $30.5 million, steady with the $29.6 million paid for an IT company in the fourth quarter of 2004. The median amount paid for a health-care company was $54 million in the fourth quarter, up substantially from the $27 million paid this quarter a year ago. The median amount these companies received in equity financing prior to acquisition was $26.1 million for IT companies and $10.6 million for health-care companies in the fourth quarter.
The largest acquisition of the year was for Angiosyn, a La Jolla, Calif., biopharmaceutical company that was acquired by Pfizer (NYSE: PFE) for $527 million. The largest acquisition of the fourth quarter was iDirect Technologies, a Herndon, VA-based provider of IP networking over satellite. It was acquired for $165 million by Vision Technologies Electronics, a subsidiary of Singapore Technologies Engineering.
The median time between initial equity financing and acquisition in 2005 was 5.4 years-the longest time period in more than a decade, and almost a year longer than the acquired companies in 2004.
The investment figures included in this release are based on aggregate findings of VentureOne's proprietary U.S. research. This data was collected by surveying professional venture capital firms, through in-depth interviews with company CEOs and CFOs, and from secondary sources. These venture capital statistics are for equity investments into early-stage, innovative companies and do not include companies receiving funding solely from corporate, individual, and/or government investors. No statement herein is to be construed as a recommendation to buy or sell securities or to provide investment advice.
VentureOne (www.ventureone.com), a unit of Dow Jones Newswires, has been the leading provider of finance and investment data to the venture capital industry for almost 20 years. VentureSource, a sophisticated electronic database on the venture capital industry, is published by VentureOne.
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