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Q2 2014 Venture Exits Update

July 23, 2014 Wiley Becker 

Quarterly IPO Activity Remains Strong

M&A Volume Steady

Healthcare Leads IPOs, While IT Leads M&A 

Exit Poll report by Thomson Reuters and the National Venture Capital Association; 2014 annualized from 06/30/14

There were 97 US venture backed M&A transactions in Q2 2014 with $3.3B 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 fell by 5% in spite of an 11% increase in the number of deals disclosed.  Consequently, the average M&A deal size fell 14% on a rolling four quarter basis to $174.4MM.  However, disclosed deal value depends highly on the composition of deals disclosed.  According to PitchBook, the median deal size is $150MM through Q2 2014 of 306 venture backed M&A exits globally (PitchBook Data, Inc. 2014).  Additionally, ten M&A exits have closed in 2014 at greater than $500MM valuations, while another 50 have closed in the $100-500MM range.

Eighty-one percent of venture backed M&A transactions in Q2 2014 were in the IT industry, while 11% were Healthcare companies; those remaining were in other sectors.  However, Healthcare deals had the highest average disclosed deal value of $134MM, while disclosed IT deals averaged only $82MM.  The largest M&A event in Q2 2014 was Intuit’s $360MM acquisition of Check Inc., a provider of financial and transaction services based in Palo Alto and previously funded by Canvas, TriplePoint, Maven, Menlo, Morganthaler, Silicom, and Pitango, among others.  Additionally, the largest hHealthcare deal was Cardinal Health’s $320MM acquisition of Access Closure, a manufacturer of vascular closure devices based in Santa Clara, which was previously funded by HealthCor, Industry, Integral, New Leaf, ONSET, Pinnacle, and Three Arch.

The number of venture-backed IPOs exceeded 20 for the fifth consecutive quarter, with 28 companies raising $4.9B in Q2 2014 according to the Exit Poll report by Thomson Reuters and the NVCA.  The number of listings is up 5% in a rolling four quarter basis, while amount raised is up significantly by 19%.  Although amount raised is not necessarily representative of the valuation of companies at IPO, 75% of the companies taken public in Q2 2014 are currently trading above their offering price.  PitchBook also reports the median IPO valuation for the first half of 2014 to be $278MM.

Healthcare companies continued to account for the greatest percentage of IPOs, representing 57% in Q2 2014 and marking the fifth consecutive quarter of double digit listings.  The largest venture backed IPO of the quarter was JD.com (NASDAQ: JD), a China-based online shopping company, which raised $2B on 5/21/14 and is currently trading at a 50% premium to its offering price.  JD was formerly backed by Digital Sky, Insight, Kleiner, and Sequoia, among others.  Twenty-two of the venture-backed IPOs in Q2 2014 listed on the NASDAQ, while six listed on the NYSE.  The number of venture-backed companies that have currently filed publicly with the SEC for IPOs increased slightly to 51, which does not include companies that may have filed confidentially under the JOBS Act.

Bobby Franklin, President & CEO of the NVCA, added that, “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…  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.” 

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