Wednesday, April 1, 2009

Report: Venture capital suffering from IPO, acquisition drought

By Mass High Tech staff

The venture capital industry in the U.S. is suffering from the worst liquidity drought on record, according to new data released by Dow Jones VentureSource. With no IPOs in eight months, the report also concludes that M&A activity isn’t much help either.

The largest M&A deal in New England in the first quarter of this year was Premise Corp. of Farmington, Conn., a medical software firm that was bought for $38.5 million by Eclipsys Corp. of Atlanta. Right behind that was the acquisition of Mazu Networks Inc. for $25 million by San Francisco-based Riverbed Technology Inc. Rounding out the list was Millipore Corp.’s purchase of biopharmaceutical Guava Technologies Inc. of California for $22 million.
 
During the first quarter of 2009, venture capitalists made just $3.2 billion via mergers or acquisitions of 68 portfolio companies, a 65 percent drop from the $9.1 billion in liquidity generated in the first quarter of 2008. That is the lowest quarterly total since 2003, the report states. 

Those 68 M&As were down sharply from the 104 in the first quarter of 2008 and counts as the lowest number of M&A deals in a single quarter since 1999.

Prices were down as well. The report showed that the median amount paid for a VC-backed company in the first quarter of 2009 was about $22 million, which is a 63 percent decline from the nearly $60 million median paid during the same period in 2008.

All of those deals were dwarfed by the purchase of CoreValve by Medtronic Inc. for $700 million -- a deal that accounted for 30 percent of all the M&A deal value in Q1 2009.