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Mergers, IPOs for Venture-Backed Companies Down in 2012

New York Stock Exchange entrance (A. Kotok)

(A. Kotok)

Initial public offerings (IPOs) and mergers and acquisitions (M&As) of venture-backed companies in the U.S. declined overall in 2012 and in the last quarter of the year. Financial industry analytics service Dow Jones VentureSource says the Facebook IPO in May 2012 influenced much of the activity and money raised during the year.

During 2012, a total of 483 exits — mergers, acquisitions, buyouts, and IPOs — raised $51.5 billion, a decrease of 19 percent in the number of deals and 7 percent decrease in the overall amount raised, compared to the 594 exits in 2011. In the fourth quarter of 2012, 121 exit deals raised $10.6 billion, a decrease in the number of deals from the 149 exits that raised $12.6 billion in the fourth quarter of 2011.

In 2012, 50 companies backed by venture capital raised $11.2 billion through IPOs, the most money raised through IPOs since 2000 and a 109 percent increase from $5.4 billion raised by 46 IPOs in 2011. The Facebook IPO in May alone accounted for 61 percent of that $11.2 billion, which was the largest deal of 2012. Business and financial services were the most active IPO industry sectors in 2012, recording 11 deals that raised $1.4 billion, an increase of 175 percent in the number of IPOs and a 221 percent increase in the amount of money raised compared to 2011.

Maryam Haque, a research analyst for Dow Jones VentureSource, says the Facebook IPO had both a stimulating and depressing influence on IPOs overall. “At the beginning of 2012, IPO deal activity increased dramatically as companies sought to capitalize on the blockbuster potential surrounding the Facebook IPO,” says Haque. “As Facebook’s performance underwhelmed investors, enthusiasm appears to have turned into caution in the IPO market.”

The last quarter of 2012 recorded eight IPOs that raised $1.2 billion, a decrease of 50 percent from the $2.4 billion raised in 10 deals during the last quarter of 2011. Some 26 venture-backed companies in the U.S. are registered for IPOs including two companies that filed in in the last quarter.

The median amount of time it took a company to reach an IPO increased 16 percent to 7.4 years in 2012 from 6.4 years in 2011, while the median amount of venture capital raised before reaching liquidity dropped 5 percent to $78.4 million in 2012.

In 2012, 403 M&As raised $37.4 billion, a 24 percent decrease in deal activity and a 23 percent decrease in the amount of capital raised compared to the 528 M&As that collected $48.4 billion in 2011. Dow-Jones Venture Source says the 403 deals in 2012 is the smallest number of M&As since 2009.

Companies in the health care industry accounted for six of the top 10 M&As for the fourth quarter of 2012, although health care represented just 15 percent of the year’s M&A activity with 66 U.S. ventured-backed companies acquired. The largest M&A deal of 2012 was Liberty Dialysis LLC, acquired by Fresenius Medical Care AG for $1.7 billion.

Buyouts of venture-backed companies in the U.S. increased in 2012, with 30 companies acquired for a total of $2.9 billion. In 2011, 20 companies were purchase for $1.4 billion.

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