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PRINT THIS PAGE US VC-backed companies see worst quarter for exits since 200301/07/2008. Source: AltAssets. 
There were no IPOs of US venture-backed companies in the second quarter of 2008 and liquidity generated via M&As fell to $4.7bn with just 56 transactions completed from the $8.8bn generated via 97 M&As in the second quarter of 2007, according to the Quarterly U.S. Liquidity Report released by Dow Jones VentureSource. The report shows that the 56 M&As mark the lowest number of transactions completed in a quarter in at least a decade.
'The US venture capital industry is in the midst of the second-longest IPO drought we have seen since we started tracking the industry in 1992,' said Jessica Canning, global research director for Dow Jones VentureSource. 'The last completed public offering for a VC-backed company was in March and we have seen ten companies withdraw IPO registrations since then. Even though there are currently 22 venture-backed companies in IPO registration, it is clear they are in a holding pattern and waiting for market conditions to improve.'
While acquirers were paying a median of $55.8m for venture-backed companies in the second quarter last year, the median amount paid for a venture-backed company in Q2 2008 rose 57 per cent to $87.6m.
'The broader pull-back in the economy is affecting corporate spending and is clearly impacting the number of deals in the M&A market,' Canning continued. 'Corporations might be out looking for venture-backed companies to acquire but many are either doing so quietly or choosing to hold off on entering into negotiations. The rise in the amount paid for acquisitions demonstrates corporations' willingness to pay for companies that are important for their growth.'
IT companies accounted for the bulk of capital raised via M&A in the second quarter with 41 transactions generating some $3.3bn in liquidity, a 29 per cent drop for the segment from the nearly $4.6bn raised in 61 M&A transactions during the same quarter last year.
Only six venture-backed healthcare companies completed M&As in the second quarter, raising just $267.8m, some 86 per cent less than the $1.9bn raised in 16 M&As for the segment in the second quarter of 2007.
With its nine completed M&A transactions amounting to roughly half of last year's second quarter total of 17, the business, consumer and retail industry accounted for $1.2bn in liquidity, well below the $2.2bn generated via M&As in Q2 2007.
The median number of years between initial equity funding and exit via an M&A now stands at a record seven years, while the median amount of venture capital raised prior to liquidity remained fairly steady at $21.3m.
Copyright © 2008 AltAssets
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