IPO Market Improving
Twenty-one venture-backed companies raised $1.835 billion through initial public offerings (IPOs) and 56 venture-backed M&A deals were reported in the fourth quarter of 2006 according to the Exit Poll report by Thomson Financial and the National Venture Capital Association (NVCA). The data reflect another year of heavy reliance on the M&A market for VC investment exits with a total of 58 venture-backed IPOs raising $5.3 billion in 2006 and 335 M&A transactions with a total disclosed value of $16.6 billion for the full year.
In terms of number of exits, 2006 venture-backed activity in both the IPO and acquisition markets varied only slightly from 2005 levels although these transactions realized higher valuations. The year 2006 marks the second strongest IPO year in terms of dollars raised out of the last six years and it is also the third strongest of the last six in terms of average IPO amount. The average acquisition value for a venture-backed company, for those deals where the acquisition price was disclosed, is the highest in six years at $113.8 million per deal.
There were 17 venture-backed IPOs on non-US exchanges for the year and three of those were in Q4.
“The year ended strongly for the venture-backed IPO market as we had the highest quarterly volume in two years. However, one quarter does not mean we are out of the woods yet and ideally we would like to see more companies in registration if a recovery is in sight for 2007,” said Mark Heesen, president, National Venture Capital Association. “There is the potential to see measurable Sarbanes-Oxley relief for smaller public companies in 2007, which would be a welcome boost for the US IPO market. In absence of this reform, however, venture capitalists will look at other liquidity paths — foreign exchanges or sale to financial intermediaries — as viable exit alternatives in the coming year,” Heesen added.

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