M&A Volume Begins to Rebound
Healthcare Leads IPOs, While IT Leads M&A
Exit Poll report by Thomson Reuters and the National Venture Capital Association ; 2014 annualized from 03/31/14
There were 105 US venture backed M&A transactions in Q1 2014 with $7.5B in disclosed deal value according to the Exit Poll report by Thomson Reuters and the NVCA. Disclosed deal value on a rolling four quarter basis increased 38%, partially due to a 19% increase in the number of deals disclosed. Additionally, the average M&A deal size reached $259MM in Q1 2014, the highest level since 2004. According to PitchBook, the median deal size was $40MM in Q1 2014 of 111 venture backed M&A exits globally (PitchBook Data, Inc. 2014).
75% of venture backed M&A transactions in Q1 2014 were in the IT industry, while 12% were Healthcare companies and those remaining were in other sectors. IT deals had the highest average disclosed deal value of $172MM, while disclosed Healthcare deals averaged $139MM. However, the total average disclosed deal value for Q1 2014 was driven primarily by the acquisition of Nest Labs in the consumer sector by Google for $3.2B. Nest is a Palo Alto-based provider of smart home hardware products and was previously backed by Kleiner Perkins, Lightspeed, Shasta, and Venrock, among others.
US venture backed IPOs reached their highest level since 2000 in Q1 2014 with 36 companies raising $3.3B according to the Exit Poll report by Thomson Reuters and the NVCA. PitchBook also reported 44 venture backed IPOs globally. There have been four consecutive quarters of over 20 venture backed IPOs in the US and the number of listings increased 35% on a rolling four quarters basis, while dollars raised increased 23%. Although amount raised is not necessarily representative of the valuation of companies at IPO, 86% of the companies taken public in Q1 2014 are currently trading above their offering price.
Healthcare companies continued to account for the greatest percentage of IPOs, representing 67% in Q1 2014. The largest venture backed IPO of the quarter was Castlight Health (CSLT), a San Francisco-based healthcare IT company that raised $204MM on 03/13/14. CSLT was formerly backed by Venrock, Oak, and USVP, among others, and is now trading on the NYSE at a 39% premium to its offering price. Twenty-eight of the venture backed IPOs in Q1 2014 listed on the NASDAQ, while eight listed on the NYSE. The number of venture backed companies that have currently filed publicly with the SEC for IPOs remained relatively stable at 46, which does not include companies that may have filed confidentially under the JOBS Act.
Bobby Franklin, President and CEO of the NVCA, noted,
Building on the momentum of 2013, the venture backed exit market is continuing to flourish in 2014. 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.”
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