IPO and M&A Exits

written by David A. Broadwin

It will come as no surprise that the number of exits (IPO and M&A transactions) for venture financed companies is way off this year -- compared to last year. As I noted in a prior posting, Series A transactions are off year on year.  Although some industries are faring well (greentech for one), on a macro level, Series A deals in New England are down approximately 30% in the first six months of 2008 compared to the first six months of 2007. You can get more detail on this in our EEC Perspectives October 2008 issue. In addition, however, the statistics for M&A and IPO transactions are worse according to the CNET NewsBlog which points out that as of July 1, 2008 there had been no IPOs for venture backed companies in the secnd quarter and that in the first half of 2008 there were 56 M&A transactions compared to 97 in the same period last year. We are still compiling the statistics for New England based Series B and later stage deals for the second quarter, but these numbers should be available shortly, and I expect they will be consistent with what we are seeing in Series A deals and exits. To some extent the problem begins with exits. If investors  don't have good visibility on potential timing or valuation of exits, it becomes very hard to complete a later round deal. If investors are anticipating difficulty raising Series B and later rounds, they are reluctant to take the risk on the early round. The silver lining may be that there is a lot of money sitting on the sidelines, and when the market turns this money will be looking for deals.