Keswick Capital Sees That Venture Backed Exit Activity Increases

Top Quote During the fourth quarter of 2010, 126 exits raised $11.8 billion, a slight increase in activity from the same period last year when 123 exits raised $11 billion. End Quote
  • (1888PressRelease) January 15, 2011 - Exit activity for venture-backed companies for the Dow Jones moved closer to levels seen before the economic downturn as 514 companies achieved liquidity in 2010, netting $39.3 billion. That represents a 25% increase in exits from 2009 and is not far from the 613 exits completed in 2007. Capital garnered through exits rose 72% from 2009 but was still down dramatically from the $69.1 billion netted in 2007.

    During the fourth quarter of 2010, 126 exits raised $11.8 billion, a slight increase in activity from the same period last year when 123 exits raised $11 billion.

    Exit activity is staging a comeback but capital netted lagged as large M&As and IPOs were still uncommon in 2010. While it isn't clear if companies with blockbuster potential - like Facebook and Groupon - will come to market in 2011, there is a healthy IPO pipeline.

    IPOs Spike in 2010

    For the first time since 2007, the number of venture-backed initial public offerings (IPOs) reached double digits. Forty-six venture-backed companies went public in 2010, raising $3.4 billion, a more than five-fold increase from the eight IPOs that raised $903 million in 2009. During the fourth quarter, 14 IPOs raised $1.1 billion.

    The largest IPO of both the fourth quarter and the year was the $211 million offering by New York-based FXCM, a provider of foreign exchange trading and services, in December.

    The median amount of venture capital raised prior to an IPO rose 60% to $69 million in 2010 from $43 million in 2009. The median amount of time it took a company to reach liquidity rose to 8.1 years in 2010 from 7.9 years in 2009.

    M&A Activity Increases, Median Paid Jumps 70%

    Despite a drop in mergers and acquisitions (M&As) in the fourth quarter, M&A activity in 2010 was well ahead of 2009. In the fourth quarter, corporate acquirers bought 109 companies for $10.5 billion, a 7% drop in M&A activity from the same period last year. Overall in 2010, 445 M&As raised $33.9 billion, a 17% increase in deal activity from 2009 when 381 exits raised $20.8 billion.

    Buyouts of venture-backed companies by private equity firms were steady year-over-year. In 2010, private equity firms spent $1.9 billion to buy 23 venture-backed companies, on par with the 23 venture-backed companies bought for $1.1 billion in 2009. In the fourth quarter, three buyouts netted $184 million, in line with the three buyouts that netted $76 million during the same period last year.

    The $46 million median amount paid for a venture-backed company in 2010 was 70% more than the $27 million median in 2009.

    In 2010, companies raised a median of $20 million in venture capital financing before achieving liquidity through a merger or acquisition, slightly less than the $21 million median seen in 2009. In addition, it took a median of 5.2 years for a venture-backed company to exit via a merger or acquisition, less time than the 5.5-year median in 2009.

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  • Ren Masaru
  • Keswick Capital
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