Tuesday, September 30, 2008

Third-quarter IPOs, M&As down two-thirds over last year

By Mass High Tech Staff

The amount of capital venture-backed companies generated during the third quarter through initial public offerings and mergers and acquisitions dropped 66 percent versus the same period last year, according to a new report from Dow Jones VentureSource.

VC-backed companies garnered $4.57 billion in liquidity during the three-month period compared with $13.4 billion in the third quarter of 2007. While there were 66 M&As completed in the quarter, generating $4.4 billion in liquidity, only one venture-backed company, Texas-based Rackspace Hosting Inc., completed an IPO, worth $159 million. 

Westborough-based wireless infrastructure provider Optasite Inc., which was acquired for $430 million earlier this month by SBA Communications, was the nation’s largest M&A of the quarter, according to Dow Jones.

For the second consecutive quarter, fewer than 70 U.S. venture-backed companies completed M&As, according to the data. The third quarter’s 66 M&A transactions raised just $4.4 billion, down 65 percent from the $12.7 billion generated in 116 M&As during the same period last year and the lowest amount raised since the fourth quarter of 2003, the report shows.

This year is on pace to post the lowest number of M&As completed in at least a decade, with only 247 M&As completed in 2008.

Information technology companies accounted for the bulk of capital raised through M&As in the third quarter with 48 transactions generating more than $2.9 billion in liquidity, 60 percent below the nearly $7.3 billion raised in 74 M&A transactions during the same quarter last year.