M&A activity slows in Q2

Venture-backed merger and acquisition exits declined from in the second quarter, compared to the previous three-month period, according to an exit poll report by Thomson Financial (publisher of PE Week) and the National Venture Capital Association. The tech sector dominated VC-backed M&A deal activity, as 52 companies were bought in Q2 for a disclosed value of about $1.7 billion.

Within technology, the computer software and Internet sectors saw the most deals with 21 and 18 transactions, respectively. M&A activity in the computer software sector surpassed $822 million in disclosed deal value, which is about half of the overall value within technology.

Meanwhile, eight life sciences companies were acquired in Q2, with a disclosed deal value of $807 million.

The largest disclosed deal of the quarter was the $500 million acquisition of financial analytic software developer OutlookSoft Corp. by Systeme Anwendungen Produkte in June. Stamford, Conn.-based Outlook raised about $60 million in venture funding, beginning in 1999, from Battery Ventures, GE Equity, Merrill Lynch Capital Partners and Pequot Capital Management.

The second largest deal was the $325 million acquisition of biotechnology company Morphotek Inc. by Eisai Inc. Exton, Pa.-based Morphotek raised about $87 million in funding beginning in 2000 from such investors as Burrill & Co., CB Health Ventures, China Development Industrial Bank, Flagship Ventures, Forward Ventures, Hunt BioVentures, MDS Health Ventures, Morgenthaler Ventures and Rock Maple Ventures, among others. —Alastair Goldfisher