Where is the exit?

Earlier in the month the National Venture Capital Association released the Thomson Venture Economics report on liquidity events for the 1st quarter of 2005 (.pdf file).  77 firms were acquired through Mergers and Acquisitions.  44 of those events with a total value of $4.2 Billion were disclosed.  It was a very quiet period for IPOs when only 10 venture backed firms went public with a value of $721 M.  NVCA suggests that stronger valuations combined with  regulatory (SOX perhaps?) and market hurdles for IPOs make Mergers & Acquisitions more attractive.  The table below is a quick snapshot of the sectors that found the exits and the disclosed value of the transactions.

Software and biotech lead in number of deals (28) and valuation per deal ($300M) respectively.  M&A activity continues to grow with the number of deals increasing quarter to quarter and average deal size under $100 M.  IPO activity had been moving upward through 2003 (29 deals with value at $2.0 B) and 2004 (93 deals with value at $11 B) from the lows of 2002 (24 deals at $2.4 B) so perhaps the low number of public liquidity events the first quarter was an aberration and not a reversal of the trend.  M&As will likely remain the favored exit strategy for many venture backed firms that get to that stage.  Lest we forget what it was like in the good old days (5 years ago) - for FY00 there were 316 M&A transactions valued at $68.4 Billion and 264 IPOs with a total value of $25.5 Billion.  Yeah - a good time was being had by all in the venture ecosystem back then.