Venture-backed company exit activity was driven by an active M&A market and level of IPOs consistent with a slow and steady recovery during the third quarter of 2010. The quarter ended with 14 venture-backed IPOs, marking slight declines in the number and total value of offerings from the second quarter of 2010. Notably, 104 acquisitions were completed in the quarter, as the venture industry continues to access the M&A market at a record pace.
The sustained strength of the acquisitions market has been the quiet, while those following the industry have been focused on the IPO market recovery, venture-backed companies have been selling at record levels, generating very respectable returns for investors. Keswick Capital (keswickcapital.com) expects this momentum to continue, and perhaps even accelerate after the November elections has settled in as large corporations put cash to work by making strategic purchases.
There were 14 venture-backed IPOs valued at $1.2 billion in the third quarter of 2010, a 2% decrease in total value from the second quarter of 2010, but more than doubling the amount raised in the third quarter of 2009. The offerings spanned a diverse set of industries.
Eight of the 14 IPO exits for the quarter were in the Information Technology sector, accounting for a total of $749.3 million. Within this sector, Beijing, China-based Camelot Information Systems, Inc. (CIS), a provider of financial industry Information Technology services, raised $67.5 million on the New York Stock Exchange.
Green Dot Corporation (GDOT), a provider of retail-based financial debt card services based in Monrovia, California, began trading on July 22nd and raised $164.1 million, marking the largest venture-backed IPO of the quarter.
SKS Microfinance, Ltd, a Hyderabad, India-based non-banking financial services company, raised $358.3 million on the Bombay Stock Exchange on August 3rd - the only company backed by US venture capital investors to go public on a foreign exchange in the third quarter.
Of the 14 IPOs in the third quarter, 11 were trading at or above their offering prices as of 9/30/2010. Forty-nine venture-backed companies are currently filed for an initial public offering with the SEC.
As of September 30, 2010, 104 venture-backed M&A deals were reported for the second quarter, 27 which had an aggregate deal value of $3.8 billion. The average disclosed deal value was $142.3 million up 7% from Q2 2010 and more than double the average disclosed transaction value in Q3 2009. This acquisitions volume marks a 7% increase from the second quarter of 2010 and puts this year on track to hit record levels. M&A volume in the first three quarters of 2010 has already nearly doubled full year 2009 transactions.
The information technology sector led the venture-backed M&A landscape, with 82 deals and a disclosed total dollar value of $1.0 billion. Within this sector, computer software and internet specific companies accounted for the bulk of the targets with 33 and 32 transactions, respectively, across these sector subsets.
In the biggest venture-backed deal of the quarter, Alcon acquired LenSx Lasers, Inc, an Aliso Viejo, California-based developer of surgical lasers for $744 million.
Deals bringing in the top returns, those with disclosed values greater than four times the venture investment, accounted for 33 percent of the total in the third quarter of 2010, according to Keswick Capital (keswickcapital.com). Venture-backed M&A deals returning less than the amount invested accounted for 26 percent of the quarter's total, compared to 15 percent last quarter.