US exits remain few

The consensus view is that global IPO markets will not be back in a meaningful way during 2003 or 2004. It remains to be seen whether the venture community will benefit from brief openings. As can be seen from the table below there were 34 IPOs of US venture-backed companies last year and up to the end of Q3 2002 just 16. General exit activity has fallen from 521 exits valued at $87.9 billion in the 2000 high to just 230 worth $6.9 billion to the end of Q3 2002.

A sector breakdown of M&A activity in Q3 2002 reflects similar trends seen in recent quarters. Software retained its dominant position relative to other sectors with 27 targets attracting $582.5 million. These transactions comprised 38.5 per cent of the total number of deals for the quarter and 32.3 per cent of total dollars. This is an increase from Q2 2002 when 23 software companies accounted for $401.6 million.

The second most active sector was IT services with nine companies acquired for $357.2 million. Compared to Q2 2002 the number of deals remained constant but the total reported value increased dramatically from $48 million to $357 million. Semiconductors, usually a strong performing sector, only had two deals valued at $19 million. Another under-performing sector was networking and equipment where the companies were sold for $20 million. In Q2 2002 this sector had five transactions valued at $241 million.

Life science related companies experienced mixed results compared to previous quarters. Two biotechnology companies were acquired in Q3 2002 while five biotechnology companies were acquired for $105 million in Q2 2002. The medical devices and equipment sector also only had two transactions compared to three last quarter, however, JP Morgan Partners acquisition of MQ Associates in August for $350 million was Q3’s largest deal and improved total transaction value of the sector from Q2’s $99 million to Q3’s $430 million.