Venture capital-backed companies are overwhelmingly choosing mergers over initial public offerings when their financiers want an exit.
According to the Exit Poll report by Thomson Reuters and the National Venture Capital Association, about 80 per cent of exits in the quarter were via M&A.
"The sustained strength of the acquisitions market has been the quiet, untold exit story of 2010,” said Mark Heesen, president of the NVCA. “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."
There were 104 venture-backed M&A deals in the quarter. Not all the deals had disclosed values, but for those that did, the average was $142.3-million (U.S.), a 7 per cent increase from the second quarter and more than twice the average in the third quarter of 2009.
The action is putting the year on pace to set a record for M&A levels. Software and Internet companies were the biggest part of the deal-making binge.
The pace of IPOs was about the same as in the second quarter, with 14 deals worth $1.2-billion, though that was double the third quarter of 2009.
In general, the IPOs in the quarter performed well, which may support further growth in that mode of exit. Of the 14 in the quarter, 11 were at or above their offer price at quarter end, according to the report.
That bodes well for the 49 venture-backed companies that Thomson Reuters said are currently filed with the Securities and Exchange Commission for an initial public offering.
