U.S. Venture-Backed Liquidity Reaches Lowest Point in 5 Years, Down 58% to $24.1 Billion in 2008
02 Januar 2009 - 2:30PM
PR Newswire (US)
Dow Jones VentureSource: Dismal Year for IPOs; Steady Decline in
M&As with Acquirers Paying 50% Less for Companies Than in 2007
SAN FRANCISCO, Jan. 2 /PRNewswire/ -- With no initial public
offerings (IPOs) and just $3.9 billion generated via mergers and
acquisitions (M&As) of 65 venture-backed companies in the
fourth quarter, 2008 proved to be the worst year in terms of
liquidity for U.S. venture capitalists since the post-tech-bust
doldrums of 2003, according to official statistics released today
by Dow Jones VentureSource
(http://www.venturecapital.dowjones.com/). Overall, U.S.
venture-backed companies generated $24.1 billion in liquidity
through IPOs and M&As in 2008, down 58% from the $57.6 billion
in liquidity produced in 2007. Just seven companies completed
public offerings in 2008, raising $551 million -- a far cry from
the $6.8 billion generated through the public listings of 76
companies in 2007 and the lowest totals recorded since
VentureSource began tracking the industry in 1992. "2008 proved to
be a very rough year for the U.S. venture capital industry," said
Jessica Canning, Global Research Director for VentureSource. "With
virtually no IPOs and corporations only making choice acquisitions,
the liquidity markets have essentially been cut off for venture
investors. Additionally, the ever-increasing amount of time it
takes for a company to go public or get acquired is stretching out
the lifecycle of venture funds and therefore returns to venture
firms and their limited partners." M&As: Downward Trajectory
After peaking in 2007 at a seven-year high of $50.9 billion,
liquidity generated through the sale (M&As) of venture-backed
companies fell 54% to $23.5 billion in 2008. According to the
statistics, only 325 venture-backed companies merged or were
acquired in 2008, the lowest number of M&A tractions since
1999, and down 29% from the 457 companies sold in 2007. In
particular, the 65 venture-backed companies sold for an aggregate
$3.9 billion in the fourth quarter of 2008 marked the lowest
quarterly transaction number since 1999 and far below the 123
companies sold for $16.4 billion in the fourth quarter of 2007.
"Overall, the median amount paid for a VC-backed company in 2008
was roughly $45 million -- half of the median $90 million paid in
2007," said Ms. Canning. "Since the fourth quarter of 2007, we've
seen the median acquisition price drop steadily from quarter to
quarter in lock-step with the decline of M&A transactions."
According to VentureSource, the largest M&A for the fourth
quarter was eBay's $945 million acquisition of Timonium,
Maryland-based transaction service provider Bill Me Later. The
largest M&A deal of 2008 was Dell's $1.4 billion acquisition
data storage company Equalogic -- a deal that was announced in the
fourth quarter of 2007 but closed in January 2008. The IPO Market:
The Door is Closed The data shows that only seven venture-backed
companies completed initial public offerings in 2008, generating
$551 million in liquidity. There were no public offerings completed
by venture-backed companies in the second and fourth quarters of
the year. Ms. Canning added: "There are currently 18 venture-backed
companies in IPO registration but nearly all of these companies
filed before the stock market fell in October and will likely
remain in a holding pattern or withdraw their offerings until the
market recovers." The largest IPO of the year belonged to
RiskMetrics Group of New York City, a provider of financial and
wealth management software, which raised $174 million in its
January IPO. More Money, More Time Go Into Reaching Liquidity Dow
Jones VentureSource also found that it's taking more time and money
for venture-financed companies to achieve liquidity. In 2008,
companies raised a record median of $22.6 million in venture
capital and took a record median of 6.5 years to reach liquidity
via M&A. In terms of IPO companies, the median amount of
venture capital raised prior to IPO fell 19% from $69 million in
2007 to $56 million in 2008. The median amount of time it took a
company to reach liquidity hit a record 8.3 years, more than a year
longer than reported in 2007 when it was 7.2 years. For more
information or to request a demonstration of Dow Jones
VentureSource, visit http://venturecapital.dowjones.com/ or call
866-291-1800. The investment figures included in this release are
based on aggregate findings of Dow Jones VentureSource's
proprietary U.S. research. This data was collected by surveying
professional venture capital firms, through in-depth interviews
with company CEOs and CFOs, and from secondary sources. These
venture capital statistics are for equity investments into
early-stage, innovative companies and do not include companies
receiving funding solely from corporate, individual, and/or
government investors. No statement herein is to be construed as a
recommendation to buy or sell securities or to provide investment
advice. Copyright (C) 2009, Dow Jones VentureSource About Dow Jones
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