Average M&A Deal Size Falls to Lowest Level Since 2013
New York, New York, July 1, 2014 – Twenty-eight venture-backed initial public offerings (IPOs) raised $4.9 billion during the second quarter of 2014, a 45 percent increase, by dollars raised, compared to the previous quarter, according to the Exit Poll report by Thomson Reuters and the National Venture Capital Association (NVCA). The second quarter marked the fifth consecutive quarter to see 20 or more venture-backed IPOs but below the strong performance of the first quarter, which marked the strongest three-month period for new listings since the third quarter of 2000. For the second quarter of 2014, 97 venture-backed M&A deals were reported, 33 of which had an aggregate deal value of $3.3 billion. This represents a 56 percent decrease in disclosed value from the first quarter of this year. Average deal size during the second quarter totaled $98.6 million, the lowest average deal size since the first quarter of 2013.
“With the various stock indices continuing to reach new heights, the environment for IPOs remains quite favorable—welcome news for venture-backed companies that have been waiting for the opportunity to go public for several years now,” said Bobby Franklin, President and CEO of NVCA. “Led by the biotechnology sector, life sciences companies appear to be the primary beneficiaries from the favorable IPO environment, with more than half of the offerings during the quarter coming from life sciences companies, marking the fifth consecutive quarter for double digit listings. It’s good to see continued investor interest in venture-backed companies, especially with there being such a backlog of great companies wanting to go public.”
IPO Activity Overview
There were 28 venture-backed IPOs valued at $4.9 billion in the second quarter of 2014. By number of deals, quarterly volume decreased 24 percent from the first quarter of this year but registered a 45 percent increase, by dollars, compared to the previous quarter.
Led by the biotechnology sector, 16 of the 28 offerings during the quarter were life sciences IPOs, representing over half of the total number of offerings during the second quarter. This marks the fifth consecutive quarter for double-digit listings in the life sciences sector.
By location, 22 of the quarter’s 28 IPOs were from U.S.-based companies. Four venture-backed IPOs were from companies based in China, raising a combined $2.4 billion. Quotient Ltd (QTNT), a United Kingdom-based biotechnology company, raised $40 million on the NASDAQ stock exchange on April 24th.
In the largest IPO of the quarter, JD.com a China-based online shopping company, raised $2.0 billion and began trading on the NASDAQ stock exchange on May 21st. The company is currently trading 50 percent above its $19 offering price.
Twenty-two companies listed on the NASDAQ stock exchange during the quarter, while six companies listed on the New York Stock Exchange. All of this quarter’s 12 biotechnology IPOs listed on the NASDAQ stock exchange.
Twenty-one of the 28 companies brought to market this quarter are currently trading at or above their offering price. There are 51 venture-backed companies currently filed publicly for IPO with the SEC. This figure does not include confidential registrations filed under the JOBS Act, where many observers believe the majority of venture-backed companies now file.
Mergers and Acquisitions Overview
As of June 30th, 97 venture-backed M&A deals were reported for the second quarter of 2014, 33 of which had an aggregate deal value of $3.3 billion, the slowest quarter by disclosed deal value since the first quarter of 2013. The average disclosed deal value was $98.6 million, a marked decline since the first quarter of 2014.
The information technology sector led the venture-backed M&A landscape with 79 of the 96 deals of the quarter and had a disclosed total dollar value of $1.7 billion. Within this sector, computer software and services and internet specific deals accounted for the bulk of the targets with 39 and 29 transactions, respectively, across these sector subsets.
The largest venture-backed M&A transaction closed during the second quarter was Intuit’s $360 million purchase of Check Inc, a Palo Alto, California-based provider of financial and transaction services. Cardinal Health’s $320 million acquisition of Mountain View, California -based Access Closure Inc ranked as the second largest venture-backed M&A deal during the quarter.
Deals bringing in the top returns, those with disclosed values greater than four times the venture investment, accounted for 45 percent of the total disclosed transactions during the second quarter of 2014. Venture-backed M&A deals returning less than the amount invested also accounted for 12 percent of the quarterly total.