US venture-backed M&A going strong

Activity nearly doubled in 2000. With IPO markets still depressed, M&A looks set to remain the most important exit route for VCs going forward.

In the fourth quarter of 2000, venture-backed mergers and acquisitions in the US rose in terms of deal value whilst the number of deals decreased, according to Venture Economics and the National Venture Capital Association.

The fourth quarter saw a total of 42 deals valued at $8.3bn, compared with 59 deals at $6.7bn in the previous quarter. Venture-backed M&A volume for the year reached $67.6bn, close to double 1999’s total of $35.3bn. The most active quarter was the second period, which saw $27.8bn worth of dealflow.

Mark G. Heeson, president of the NVCA, commented: “The acquisition market for venture-capital backed companies has grown dramatically over the past few years. A strong acquisition market is just as important as a strong IPO market.”

Adam Reinebach, vice president of Venture Economics was upbeat as well, saying: “Barring a recession, we expect venture-backed M&A activity to continue in 2001. Given the current IPO market, a merger may be the most viable exit strategy for some private companies.”

Most M&A activity, in terms of deals, was seen in the computer software and services and internet-specific sectors last quarter, at 10 each. The internet-specific industry also ranked first in total volume, with $4.1bn worth of transactions.