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News
IPOs Of Venture-Backed Companies Raise $1.3 Billion in Q2 2004
Full apportionment credit is hereby given to VentureOne.
In the second quarter, 24 venture-backed U.S. companies completed initial public offerings (IPOs) that raised $1.3 billion, the most that have occurred in a single quarter since 2000, according to VentureOne, a wholly owned subsidiary of Dow Jones & Company. This shows an increased appetite for IPOs of U.S. venture-backed companies, leading to a dramatic improvement in liquidity activity.
Maintaining a positive liquidity environment, the number of mergers and acquisitions of venture-backed companies held steady with the robust level of M&A activity reported in the first quarter of the year. In the second quarter, 88 venture-backed U.S. companies were merged or acquired, totaling $5.5 billion paid. Information-technology companies led the M&A deals completed, while health-care companies dominated the number of IPOs that occurred.
"Health-care companies clearly see a receptive public market. Two-thirds of the IPOs that occurred this quarter were in the health-care category, and more than half, 13 of them, were within the biopharmaceutical segment," said John Gabbert, vice president of Worldwide Research for VentureOne. "We’ve seen the level of investment in the biopharmaceutical sector buoy the venture-capital industry for more than a year now, and the effect is carrying over into liquidity opportunities."
He continued: "The 24 IPOs this quarter also represent more public offerings of venture-backed companies than occurred annually for each of the last three years. Our records also show that 48 venture-backed companies are currently registered to go public, indicating that the increased pace of public offerings may continue throughout the year."
While the pace is showing improvement from the drought experienced during the past three years, it is unlikely to match the number of IPOs that occurred throughout the 1990s. From 1992 to 2000, the average annual number of IPOs was 160. While health-care had the highest number of IPOs this quarter, the company that raised the most through its IPO was in the information-technology sector: business applications software company Salesforce.com (NYSE: CRM), which raised $110 million in its June 23 public offering. Another notable IPO occurred on the last day of the quarter: Life Time Fitness (NYSE: LTM) a chain of health and fitness centers completed a $183.2 million IPO, of which $81.1 million was raised by the company. The median amount raised in second quarter IPOs was $51 million, a decrease from the $58 million median last quarter. The companies that did reach the public markets still required a high level of investment from venture capitalists prior to their public offerings. The median amount raised prior to liquidity for the current crop of IPO companies was $74 million, a decrease from the pre-liquidity amounts raised by IPO companies in the past two quarters but still at a historically high level.
The median amount paid for mergers and acquisitions was $49 million in the second quarter, nearly identical to the median amount paid in the first quarter. The median amount of investment these companies raised prior to liquidity was $25 million. Almost two-thirds of M&A deals in the second quarter were in the IT sector, with the total amount paid for IT companies reaching $3.4 billion. Within the category, software companies had the most M&A deals, followed by communications firms. The largest M&A of the quarter was the $486.7 million acquisition of integrated broadband access developer Catena Networks (Redwood Shores, Calif.) by CIENA (Nasdaq: CIEN) on May 3. Meanwhile, 17 health-care companies completed M&As this quarter, for a total of $1.3 billion paid.
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