08/01/2004
The value of venture capital-backed companies is on the rise after several years in the doldrums, according to Thomson Venture Economics, a data vendor, and the National Venture Capital Association (NVCA), a trade group. The value generated by mergers and acquisitions involving venture-backed companies in the first quarter increased 75 percent over the previous quarter’s total, the association reported.
Seventy-seven venture-backed companies completed transactions totaling $4.03 billion. In the fourth quarter of last year, 71 transactions, totaled $2.3 billion, took place. Venture-backed M&A values have not surpassed $4 billion since the first quarter of 2001.
The software sector dominated the deal making, with 23 transactions and a total disclosed value of $1.35 billion (the value of some transactions are not disclosed). Medical devices and equipment companies also witnessed an upsurge in M&A. When combining the figures for these medical-device businesses with biotechnology targets, merger and acquisition activity in the life sciences sector amounted to about 20 percent of the quarter’s activity, with $797.5 million in disclosed value.
Oddly, despite better valuations and renewed optimism in the private equity markets overall, fewer funds were raised in the first quarter of 2004 than in the previous quarter (see chart). Thirty-two funds closed on $2.3 billion, a drop from the previous quarter’s $5.4 billion, garnered by 50 funds, according to the report. The first quarter’s level was akin to the third quarter of 2003.