Average M&A Deal Size at Highest Level Since 2004
New York, New York, April 2, 2014 – Thirty-six venture-backed initial public offerings (IPOs) raised $3.3 billion during the first quarter of 2014, a 50 percent increase, by number of new listings, compared to the previous quarter, according to the Exit Poll report by Thomson Reuters and the National Venture Capital Association (NVCA). This quarter, which marks the fourth consecutive quarter to see 20 or more venture-backed IPOs, is the strongest three-month period for new listings since the third quarter of 2000. For the first quarter of 2014, 105 venture-backed M&A deals were reported, 29 of which had an aggregate deal value of $7.5 billion. This represents a 12 percent increase in disclosed value from the fourth quarter of last year and marks the strongest quarter for M&A disclosed value since the third quarter of 2012. Average deal size during the first quarter totaled $259.2 million, the highest average deal size since the first quarter of 2004.
Building on the momentum of 2013, the venture-backed exit market is continuing to flourish in 2014,” said Bobby Franklin, President and CEO of NVCA. “We are encouraged to see life sciences companies experience a period of revival in the public markets. Led by the biotechnology sector, 24 of the 36 IPOs this quarter were life sciences companies, representing over half of the total amount raised. This marks the fourth consecutive quarter for double-digit listings of life sciences companies since the fourth quarter of 2000 and the start of what we hope is a sustained level of growth in the sector.
IPO Activity Overview
There were 36 venture-backed IPOs valued at $3.3 billion in the first quarter of 2014. By number of deals, quarterly volume increased 50 percent from the fourth quarter of last year but registered a 38 percent increase, by dollars, compared to the previous quarter. Excluding the top two venture-backed IPOs of all time, Facebook ($16.0 billion) and Twitter ($2.1 billion), the first quarter of 2014 marks the strongest quarter for dollars raised by venture-backed companies since the second quarter of 2011.
Led by the biotechnology sector, 24 of the 36 offerings during the quarter were life sciences IPOs, representing over half of total proceeds raised in the first quarter. This marks the fourth consecutive quarter for double-digit listings in the life sciences sector since the fourth quarter of 2000.
By location, 35 of the quarter’s 36 IPOs were from U.S.-based companies. Aquinox Pharmaceuticals (AQXP), a Vancouver, Canada-based developer of small molecule therapeutics, raised $53.3 million on the NASDAQ stock exchange on March 6th, the only non-U.S. offering of the quarter.
In the largest IPO of the quarter, Castlight Health (CSLT), a San Francisco, California-based healthcare software company, raised $204.2 million and began trading on the New York Stock Exchange on March 13th. The company is currently trading 39 percent above its $16 offering price.
Twenty-eight companies listed on the NASDAQ stock exchange during the quarter, while eight companies listed on the New York Stock Exchange. All of this quarter’s 19 biotechnology IPOs listed on the NASDAQ stock exchange.
Thirty-one of the 36 companies brought to market this quarter are currently trading at or above their offering price. There are 46 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 March 31st, 105 venture-backed M&A deals were reported for the first quarter of 2014, 29 of which had an aggregate deal value of $7.5 billion, the strongest quarter by disclosed deal value since the third quarter of 2012. The average disclosed deal value was $259.2 million, a 35 percent increase compared to the fourth quarter of 2013.
The information technology sector led the venture-backed M&A landscape with 79 of the 105 deals of the quarter and had a disclosed total dollar value of $3.3 billion. Within this sector, Computer Software and Services and Internet Specific deals accounted for the bulk of the targets with 37 and 32 transactions, respectively, across these sector subsets.
The largest venture-backed M&A transaction closed during the first quarter was Google’s $3.2 billion purchase of Nest Labs Inc, a Palo Alto, California-based provider of home hardware products. VMWare’s $1.5 billion acquisition of Atlanta, Georgia-based Air Watch LLC 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 41 percent of the total disclosed transactions during the first quarter of 2014. Venture-backed M&A deals returning less than the amount invested also accounted for 41 percent of the quarterly total.