Market volatility and sub-prime mortgage concerns are apparently no concern for VC-backed companies, according to the Exit Poll report by Thomson Financial (publisher of PE Week) and the National Venture Capital Association.
A total of 67 venture-backed companies merged or were acquired in the third quarter of 2007, 34 of which had disclosed values of about $7.7 billion. That’s up more than 100% from the same quarter last year when 41 disclosed deals accounted for $3.8 billion in value.
NVCA President Mark Heesen notes that the growth in M&A deals was significant because the third quarter was marked by stock market volatility and growing concerns about the state of sub-prime mortgages. “But venture-backed companies navigated these hurdles well as evidenced by strong M&A transactions,” Heesen says.
He admits, however, that VCs looking to benefit from an exit or two are sure to face several challenges over the next several quarters, such as how some investors are reporting, anecdotally, that it’s taking longer to close M&A deals as corporations remain cautious about buying in an unpredictable market.
Still, in the third quarter of 2007, total disclosed venture-backed M&A dollar volume reached the highest level since Q1 of 2001, when 37 disclosed deals accounted for $7.7 billion in value. Also, the average deal size of more than $226 million for disclosed venture-backed M&A transactions in Q3 2007 has not reached that high since the fourth quarter of 2000.
The tech sector dominated the VC-backed M&A landscape last quarter, as 45 tech companies were bought with combined disclosed transaction values of about $3.8 billion, according to the Exit Poll. The Internet sector reached $2.2 billion in disclosed deal value, or about 60% of the overall value within tech M&A.