Venture-Backed Exits Enjoyed Higher Average Values on Lower Total Volumes in 2012

Both IPO and Acquisition Quality Improved as Market Uncertainty Slowed Transactions in the Second Half of the Year

Marketwired

NEW YORK, NY--(Marketwire - Jan 2, 2013) - Venture-backed initial public offering (IPO) activity raised $1.4 billion from eight offerings during the fourth quarter of 2012, a slight decline in volume from the third quarter of this year but a 23 percent increase in dollars raised compared to the previous quarter, according to the Exit Poll report by Thomson Reuters and the National Venture Capital Association (NVCA). For full year 2012, venture-backed initial public offerings raised $21.5 billion from 49 listings, and driven by the Facebook offering, represented the strongest annual period for IPOs, by dollar value, since 2000. For the fourth quarter of 2012, 95 venture-backed M&A deals were reported, 26 of which had an aggregate deal value of $3.5 billion, a 57 percent decrease from the third quarter of 2012. Acquisitions of venture-backed companies totaled $21.5 billion for full year 2012, an 11 percent decline from full year 2011.

"While the venture capital and startup communities were optimistic about a more robust IPO market in 2012, political, economic and market conditions served as the backdrop for a series of fits and starts which hurt volume growth throughout the year for public offerings and acquisitions alike," said Mark Heesen, president of the NVCA. "Yet, while increased volumes remained elusive, the overall quality of exits this year was quite strong, and certainly sends a message that the market is receptive and open for business in 2013."

Quarter/Year Total  M&A Deals   M&A Deals with Disclosed Values   *Total Disclosed M&A Value ($M) *Average M&A Deal Size   ($M) **Number of IPO's  Total Offer  Amount ($M) Average IPO Offer Amount ($M)
2007 488   200   30,745.5 153.7 92 12,365.5 134.4
2008-1 129   43   5,201.6 121.0 6 577.5 96.3
2008-2 102   28   3,145.2 112.3 0 0 0.0
2008-3 109   40   5,248.8 131.2 1 187.5 187.5
2008-4 76   23   2,641.3 114.8 0 0 0.0
2008 416   134   16,236.9 121.2 7 765.0 109.3
2009-1 80   19   830.5 43.7 0 0 0.0
2009-2 77   14   1,982.4 141.6 7 997.6 142.5
2009-3 96   30   2,224.3 74.1 2 522.5 261.3
2009-4 98   45   7,327.7 162.8 4 459.7 114.9
2009 351   108   12,364.9 114.5 13 1,979.8 152.3
2010-1 146   36   4,945.1 137.4 8 921.9 115.2
2010-2 108   30   2,681.4 89.4 18 1,548.4 86.0
2010-3 133   36   4,140.9 115.0 17 1,996.0 117.4
2010-4 134   47   5,932.8 126.2 25 3,142.8 125.7
2010 521   149   17,700.3 118.8 68 7,609.1 111.9
2011-1 135   51   5,966.8 117.0 14 1,526.9 109.1
2011-2 92   37   6,202.3 167.6 21 5,883.5 280.2
2011-3 139   43   6,934.5 161.3 5 475.9 95.2
2011-4 122   38   4,989.6 131.3 11 2,803.2 254.8
2011 488   169   24,093.2 142.6 51 10,689.5 209.6
2012-1 112   28   3,671.0 131.1 19 1,682.8 88.6
2012-2 118   31   6,180.2 199.4 12 17,219.1 1434.9
2012-3 110   35   8,088.8 231.1 10 1,140.7 114.1
2012-4 95   26   3,523.2 135.5 8 1,408.4 176.1
2012 435   120   21,463.2 178.9 49 21,451.2 437.8
                   
Source: Thomson Reuters & 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

There were eight venture-backed IPOs valued at $1.4 billion in the fourth quarter of 2012. By number of deals, quarterly volume fell 20 percent from the third quarter of this year but increased 23 percent compared to the value registered during the third quarter of 2012.

Five of the eight IPOs of the quarter were IT-related IPOs representing 63 percent of the total issues for in the quarter. By location, seven of the quarter's eight IPOs were by U.S.-based companies with China-based YY, Inc., an operator of an online game community, rounding out the quarter's listings.

In the largest IPO of the quarter, Workday, Inc. (WDAY), a Pleasanton, California-based developer of human resource enterprise solutions, raised $733 million and began trading on NASDAQ on October 11th.

  Q4 2012
                               Industry *Number of Venture-Backed IPO's in the U.S. Total Venture-Backed Offering Size ($M)
Information Technology Computer Software and Services 1 732.6
Internet Specific 2 235.5
Communications and Media 1 126.0
Semiconductors/Other Elect. 1 41.4
  5 1,135.4
Life Sciences Biotechnology 2 167.2
  2 167.2
  Industrial/Energy 1 105.8
  1 105.8
TOTAL 8 1,408.4

Source: Thomson Reuters & National Venture Capital Association
*Includes all companies with at least one U.S. VC investor that trade on U.S. exchanges, regardless of domicile

For the fourth quarter of 2012, five companies listed on the NASDAQ stock exchange and three companies listed on the New York Stock Exchange. During full year 2012, 30 companies listed on the NASDAQ stock exchange, while 18 listed on the New York Stock Exchange and one listed Over-the-counter.

Seven of the eight companies brought to market this quarter are currently trading above their offering price. Of the 49 offerings for the year, 30 are trading above their offering price. There are 27 venture-backed companies currently filed publicly for IPO with the SEC. This figure does not include confidential registrations filed under the JOBS Act.

Mergers and Acquisitions Overview

As of December 31st, 95 venture-backed M&A deals were reported for the fourth quarter of 2012, 26 of which had an aggregate deal value of $3.5 billion. The average disclosed deal value was $135.5 million, a three percent increase from the fourth quarter of 2011.

The information technology sector led the venture-backed M&A landscape with 65 of the 95 deals of the quarter and had a disclosed total dollar value of $1.6 billion. Within this sector, Computer Software and Services and Internet Specific deals accounted for the bulk of the targets with 33 and 23 transactions, respectively, across these sector subsets. 

    Q4 2012    
                               Industry Number of Venture-Backed M&A deals Number of  Venture- Backed M&A  deals with a disclosed value   Total Disclosed Venture- Backed  Deal Value ($M)
Information Technology Computer Software and Services 33 4   199.3
Internet Specific 23 4   101.7
Communications and Media 5 1   1,200.0
Computer Hardware 2 0   0.0
Semiconductors/Other Elect. 2 2   110.5
  65 11   1,611.5
  Medical/Health 16 11   1,604.5
Life Sciences Biotechnology 2 1   1.5
  18 12   1,605.9
Non-High Technology Other Products 4 1   158.0
Consumer Related 1 0   0.0
Industrial/Energy 7 2   147.9
  12 3   305.9
TOTAL 95 26   3,523.2

Source: Thomson Reuters & National Venture Capital Association

The largest venture-backed M&A transaction completed during the fourth quarter of 2012 was Cisco Systems $1.2 billion purchase of Meraki, Inc, a San Francisco California-based developer of solutions for the deployment of wireless networks.

Deals bringing in the top returns, those with disclosed values greater than four times the venture investment, accounted for 58 percent of the total disclosed transactions during fourth quarter of 2012, on par with the third quarter of this year. Venture-backed M&A deals returning less than the amount invested accounted for 21 percent of the quarterly total.

Analysis of Transaction Values versus Amount Invested        
Relationship between transaction  value and investment Q1 12 M&A** Q2 12 M&A** Q3 12 M&A** Q4 12 M&A**
Deals where transaction value is less than total venture investment 7 3 8 5
Deals where transaction value is 1-4x total venture investment 7 12 7 5
Deals where transaction value is 4x-10x total venture investment 11 6 10 10
Deals where transaction value is greater than 10x venture investment 3 10 7 4
Total Disclosed Deals 28 31 32 24
Source: Thomson Reuters & National Venture Capital Association    
** Disclosed deals that do not have a disclosed total investment amount are not included   

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About National Venture Capital Association

Venture capitalists are committed to funding America's most innovative entrepreneurs, working closely with them to transform breakthrough ideas into emerging growth companies that drive U.S. job creation and economic growth. According to a 2011 Global Insight study, venture-backed companies accounted for 12 million jobs and $3.1 trillion in revenue in the United States in 2010. As the voice of the U.S. venture capital community, the National Venture Capital Association (NVCA) empowers its members and the entrepreneurs they fund by advocating for policies that encourage innovation and reward long-term investment. As the venture community's preeminent trade association, NVCA serves as the definitive resource for venture capital data and unites its nearly 400 members through a full range of professional services. For more information about the NVCA, please visit www.nvca.org.

Contact:
CONTACTS

Emily Mendell
NVCA
1.610.565.3904
emendell@nvca.org

Lauren Herman
Thomson Reuters
1.646.223.5985
lauren.herman@thomsonreuters.com

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