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Print Edition StoriesWednesday, July 1, 2009
VC-backed M&As down in Q2
By Mass High Tech staff
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The second quarter closed with the public stock markets posting their best quarter since 2003, while venture capital-backed startup investors saw the opposite story — one of the worst quarters in six years, according to newly released data.
Overall investor cashouts from VC-backed companies dropped 57 percent nationally, according to Dow Jones VentureSource, despite a slight opening of the window for initial public offerings.
Despite this morning’s news of the $107 million raised through an IPO by LogMeIn Inc. , New England’s VC-backed companies were poorly represented among the quarter’s top M&A and IPO deals. Just one Massachusetts company was among the top M&A deals — Network communications equipment maker Acme Packet Inc.’s purchase of privately held Maynard-based Covergence Inc. in April for $22.8 million.
Nationally, VC investors raised just $2.57 billion from the mergers or acquisitions of 67 portfolio companies in the second quarter, a 60 percent decline from last year’s second quarter and the lowest number of deals since 1999, VentureSource reported.
What’s worse, with IPOs continuing to be a difficult avenue for VC investors to generate strong returns, M&A deal values are also trending downward. According to VentureSource, the overall median amount paid for a VC-backed company in the second quarter of 2009 was just under $22 million — a 46 percent drop from the nearly $41 million median deal value reported in the year-earlier quarter.
The deals themselves came quicker, however — with the median amount of time for portfolio companies to reach liquidity via M&A reported to be 4.5 years, or 25 percent faster than the 6-year median in the second quarter of 2008. VC-backed portfolio companies nationally also raised 30 percent less than the median amount reported a year ago: $16.3 million worth of venture capital raised compared with a $23.4 million median amount in the year-earlier quarter.
In the first quarter, VC deals in Massachusetts and New England dropped another 16 percent from the year earlier — which itself had been off 40 percent from first-quarter 2007.
New England totaled just 61 VC deals in first-quarter 2009 for a value of $594 million, according to Dow Jones VentureSource. It was the lowest first-quarter investment total since 1998, when local financings reached $439 million.
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