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European liquidity report: 2007 Q1
25/07/2007. Source:VentureOne.
 Venture-backed European liquidity exits decline in first quarter 2007, while the median prices paid for mergers and acquisitions are at their highest point since 2000, according to the European liquidity report from VentureOne.
Ten (10) initial public offerings (IPOs) were completed by European venture-backed companies in the first quarter of 2007, making it the slowest quarter for public market exits since the first quarter of 2006, according to the European Liquidity Report released today from Dow Jones VentureOne, the publisher of VentureSource. However, the total capital raised by these first quarter IPOs reached 263.0 million, a 46% increase over the amount raised by IPOs in the same quarter a year ago.
Whilst the data showed that the number of IPOs by European-headquartered companies actually improved slightly from the first quarter of 2006, when only nine IPOs were completed, this activity represented a significant drop off from the 32 IPOs completed in the fourth quarter of last year.
The slowdown was also apparent for venture-backed mergers and acquisitions (M&As) which, at 34 transactions, were the fewest in a single quarter since the first quarter of 2003. However, the median acquisition price paid for a venture-backed company in an M&A transaction reached 28.6 million, up from 17.5 million in the first quarter of 2006, and the highest point since the third quarter of 2000, according to the data.
The slow-down in liquidity events may simply be a sign that the first quarter is an administratively focused one for European investors and their portfolio companies. For the past three years, the first quarter has been among the slowest quarters for initial public offerings, said Jessica Canning, Director of Global Research at VentureOne. On the bright side, the acquired companies are being bought at record prices and the IPO companies, individually, are raising more capital at IPO and are achieving significant market valuations.
IPOs Raise More
The median amount the companies raised at IPO in the first quarter was 16.7 million, the highest median over the past four quarters, but lower than the 22.0 million median reported in the first quarter of 2006. The median premoney valuation at IPO was 46.5 million, also the highest median since the first quarter of 2006, the data found. However, these companies also required a substantial amount of equity capital prior to completing an IPO; the median of 20 million was the highest on record.
By industry, there were six healthcare IPOs, all within the biopharmaceuticals segment, which raised a total of 153.6 million, and three information technology IPOs, which raised a total of 14.5 million. But the largest IPO of the quarter fell into neither of those two categories. It was for ElectroMagnetic GeoServices of Trondheim, Norway, which raised 94.9 million in its March IPO and had a market capitalization of 1.27 billion. The company provides technology designed to use electromagnetic energy to detect hydrocarbons beneath the sea bed.
By country, France, Germany, Norway and the United Kingdom had two companies apiece complete IPOs in the first quarter, with Italy and Belgium each responsible for one.
M&A Activity Declines but Acquisition Prices Increase
In other exit transactions, there were 34 merger-and-acquisition (M&A) deals for European venture-backed companies in the first quarter, down from the 56 that occurred in the first quarter of 2006. By industry, 21 of the current M&As were information technology companies, 10 were healthcare companies and the remaining three were in the financial services, education services and energy industries.
The overall median amount paid for a European venture-backed company in the first quarter was at the highest level in more than six years. Even more noteworthy was the median amount paid for healthcare companies, which hit a record-breaking 52.1 million. In addition, the median amount paid for information technology companies was the highest in the segment for a year, standing at 29.1 million. The median amount of equity capital these companies required prior to their acquisitions was 10.6 million for the healthcare companies and 5.3 million for the technology companies, the data showed.
Among the largest acquisitions in the first quarter was the 322.5 million purchase of cable television network Karneval Media of Prague by Liberty Global (Nasdaq: LBTYA). For healthcare acquisitions, it was AstraZenecas (LSE: AZN) 124.8 million purchase of Arrow Therapeutics of London, a developer of anti-viral therapeutics.
Regardless of industry, European venture-backed companies are continuing to take longer to achieve a liquidity exit, according to the report. The median time required to go from initial financing to acquisition is now about 6.6 years, almost a year longer than it took for companies acquired in the first quarter of 2006. However, the median time to reach IPO, at 5.8 years, is around the same as last year.
Dow Jones VentureOne has been the leading provider of finance and investment data to the venture capital industry for 20 years. VentureSource, a sophisticated electronic database on the venture capital industry, is published by VentureOne.
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