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M&A Market Analysis: Which Way From Here?

By on February 18, 2015

singapore-404284_1280The M&A market has been on a roller coaster ride. In the fourth quarter of 2014, both M&A deals and VC investing have shown some indications of cooling from their stratospheric heights earlier last year.

At the same time, public markets have been volatile with international markets in turmoil and oil prices collapsing. It remains to be seen how public markets will affect the M&A market. Finally Exitround has its own  data to indicate potential future directions of the market. In this Market Analysis we review various data sources and provide some thoughts on what that tells us about where the M&A market is heading.

M&A Deal Flow Slows 
M&A deal flow cooled slightly in Q4 2014 after a hot Q3 but still remained very active. In Q4 2014, the number of VC-backed M&A deals were down 23% to 102 from 132 in Q3 2014, according to Dow Jones VentureSource. It will be interesting to see if the number of deals picks back up in Q1 2015 or whether buyers remain cautious. Despite the drop in number of deals, total M&A dollars spiked by a stunning 60% to $32.3 billion in Q4 2014 from $20.1 billion in Q3 2014–mostly due to Facebook’s Whatsapp $19 billion acquisition.

With the benefit of Facebook’s massive acquisition, the fourth quarter was the largest by aggregate deal value since the dot-com era of Q2 2000 and the second strongest quarter since 1994, according to the National Venture Capital Association.

For the full year of 2014, it was a strong year for M&A. While the data was skewed somewhat by Facebook’s Whatsapp acquisition, the full year still had $26.5 billion in total deal value, up 57% from all of 2013 and still the largest M&A deal value since 2007, according to NVCA.

The largest deals of the quarter came via Facebook’s $19 billion purchase of Whatsapp, Johnson and Johnson’s $1.75 billion purchase of Alios BioPharma Inc. and Rakuten’s $981 million acquisition of Ebates.

Worldwide, 2014 was a strong year as there were 58% more global tech exits in 2014, compared to 2013, according to CB Insights. In particular, large buyers were active looking for major deals to create new divisions or fill major product holes. There were 32 billion-dollar exits (“unicorns”) in 2014, up from 17 in 2013.

Yet while the largest focus remained on massive “unicorn” deals, most tech acquisitions remain substantially smaller. About 44% of 2014 acquisitions occurred for a startup whose last round was a seed round or Series A round, according to CB Insights, which fits with trends Exitround has seen. In addition, 73% of tech company exits in 2014 involved sellers who hadn’t raised any institutional venture funding. With the growing strength of angel investing and crowdfunding platforms, more and more entrepreneurs should be able to build and sell successful companies without institutional funding.

The start of 2015 has seen a number of significant deals but not many approaching the massive deals seen last year. For example, Amazon acquired Annapurna Labs for a reported $370 million. In a remarkable example of non-tech companies buying technology in order to compete, Under Armour acquired MyFitnessPal for $475 million.

Venture Capital Funding
Meanwhile, VC funding for startups has moderated slightly but has also remained very active. The number of venture investments dropped in Q4 2014, but dollars invested still increased. VCs poured $13.8 billion into 824 US deals in Q4 2014, which was up 24% in dollars, despite deals dropping 12% from the prior quarter. Seed deals dropped 40% from Q3 2014, and 56% from the year-ago period.

First and second round deals also dropped, while late stage deals were roughly flat. Median deal size increased $6.8 million in Q4 2014 from $5.0 million in Q3 2014 and $4.18 million a year ago. Median pre-money valuations also continued to stay hot, as a reflection of the hot VC funding market, increasing to $45.6 million in Q4 2014, up from $35.0 million in the prior quarter and $21.63 million in the year-ago quarter.

This strong funding at the late stage is a result of large investors coming in at the pre-IPO stage, looking for public market investments before companies go public. The decrease in seed and early stage deals does present questions about the future direction of the market. If VCs start to pull back from early stage and invest more in later stage deals, that could indicate a problem for earlier stage companies. At the same time, the number of seed investing firms has continued to increase and angel investing has grown with sites like AngelList, so entrepreneurs should still have opportunities to raise funding–at least at the early stage.

Public Markets
The public markets have seen a significant increase in volatility this year. The crash in oil prices and instability in Greece and the Euro region has sent shockwaves through the markets, though they have recently recovered somewhat.

If volatility continues to increase and equity markets drop, as some analysts predict, this could filter down into the M&A and startup market. We could then see some pullback in M&A, particularly among mega deals as buyers wait out the uncertainty. Venture funding could also (temporarily) slow somewhat in a down market scenario. Still, we expect M&A to remain relatively strong this year, particularly in the boutique side of the market, as large companies flush with cash continue to look for innovation, products and talent.

Exitround Data
The Exitround marketplace has seen a strong buyer demand for technology companies in certain sectors. These areas included mobile, big data, adtech, enterprise software and social media. In terms of technology, buyers were most interested Javascript, Ruby, and iOS and Android, as well as Hadoop, Java and MongoDB.

In terms of locations, the most popular companies came from technology centers including the San Francisco Bay Area and New York City. Other areas with strong demand included: Los Angeles, London, Boston, Toronto, Denver, Austin, Chicago and Seattle.

The number of buyers signing up for Exitround has also continued to increase as they look to find companies to fill critical needs in product, IP or talent.

For more on recent data from Exitround, see this post on what buyers are looking for on Exitround.

Conclusion
The M&A market remains active but has slowed down–slightly. But there are macro trends that will keep M&A robust this year. Major corporations, driven by needs for new product, IP, and talent, are increasingly looking for technology companies to acquire in order to compete in today’s market. As a result, we expect to see continued strong M&A activity in the absence of any major market shocks. Even with inevitable market volatility this year, the boutique sector of the market will stay extremely busy this year.

photo credit: joinbrand/pixabay

Adtech M&A Prices Take A Hit After IPO Troubles in 2014

By on February 18, 2015

Median-adtech-price-exitround

Despite a spike in the number of adtech M&A deals in 2014, average adtech M&A prices are down by 42.1% since a spate of recent disappointing adtech IPOs, while overall average M&A prices were down just 10.6%. VC investment in adtech on a quarterly basis has been dropping since Q1 2013, when it hit 128 deals.

Exitround is unveiling today the first in a series of “Sector M+A and VC reports”, which take a comprehensive look at the performance of leading sectors of the economy. Our first report takes a look at the adtech sector.

A Look at the Adtech Sector

How has the poor performance of recent adtech IPOs affected the acquisition and VC investing market for private adtech companies? Exitround took a deep dive into the adtech market to examine the impact of IPOs on adtech dealmaking.

We wanted to examine the impact of this IPO turmoil on private market M&A and VC deals. We examined two time periods: the first time period, June 2013 to July 2014 was during the recent IPOs. Then we looked at the time period after the recent IPOs, from July 2014 to end of Nov 2014 to see the impact.

adtech-avg-price-exitround

 

From June 2013 to July 2014, there were seven adtech IPOs: Tremor Video, YuMe, RocketFuel, Criteo, Rubicon, TubeMogul. Four of the seven are now trading below their IPO offering prices. Tremor Video, for example, went public on June 27, 2013 at $10 per share and ended the day down 15% and is now trading at $2.14 amidst a struggle to shift to programmatic ad buying.

Since July 2014 there haven’t been any adtech IPOs, as investor appetite for adtech companies has slowed after the recent slate of IPOs. However 2014 was a busy year for adtech M&A as consolidation swept the market and the number of deals spiked (see Chart 4 below). And there were still some large M&A deals in the sector, such as Yahoo’s $640 million deal for Brightroll and Yahoo’s $200 million acquisition of Flurry. Facebook also acquired Liverail for a reported $400 million.

Since July 2014 there haven’t been any adtech IPOs, however.

Deals-adtech-exitroundWhat We Found

We found that average and median adtech M&A prices have dropped since the recent adtech IPOs. In other words since the last adtech IPO, M&A prices in the second period of time have noticeably dropped. This downturn in prices was also seen in the overall M&A market from the first time period to the second time period. However, overall average M&A prices were down 10.6%, while average adtech prices were down a much more significant 42.1%. Median adtech M&A prices were down 50.2%, while overall median M&A prices were down just 3.4%.

Adtech M&A Deals Chart

While adtech prices were down, the number of adtech deals ticked up slightly from the first period to the second period.(The number of deals were measured on an annualized basis to account for the different number of days in the two periods.) Looking at adtech M&A from the perspective of the number of deals shows relative strength in the adtech market since Q2 2013. Many deals are getting done and buyers are hungry for adtech companies to acquire – but large buyers appear to not be looking for as many major acquisitions but rather to fill smaller holes in their product or talent portfolio.

Adtech VC Exitround

The Impact on VC Investment

Meanwhile, looking at VC investment in adtech on a quarterly basis, the number of deals has been dropping substantially since Q1 2013, when it hit 128 deals. This could be a declining VC interest in the sector, or difficulty raising funding for adtech companies recently. Recent weakness in the public markets with adtech IPOs may be causing downward pricing pressure on multiples and comps in the private markets. Meanwhile, median VC round size has remained relatively steady in recent quarters. Average VC round size has increased in Q1 and Q2 2014, indicating that those companies that have been able to raise funding are raising more than usual in order to prepare for potential future weakness in the market or to account for a difficult IPO market.

Also, VC investing in adtech has started dropping since before the seven adtech IPOs mentioned above and before the downturn in adtech M&A prices. One explanation: venture capitalists saw the many adtech IPOs coming and decided the market was overheated.

What We Learned

There does seem to be an impact from the weak adtech IPO market on the M&A and VC investing market, as adtech prices have dropped. At the very least, there’s a strong correlation between the two. While buyers are still quite active doing deals for adtech companies and 2014 was still a banner year for the number of deals completed, they tended to be smaller deals (and we’re not even including the deals with “undisclosed” prices that typically are very small deals). The larger deals are not happening as much since July 2014 or they’re happening at lower prices. Buyers could be waiting to see how things shake out with public markets before they re-commit to larger deals this year.

Also, the M&A market overall cooled somewhat at the end of 2014, with Yahoo’s purchase of BrightRoll being a notable exception, as buyers try to understand which way the economy and stock market is moving.

A note on sources: Exitround reviewed publicly available data sources including Crunchbase, as well as Exitround’s proprietary M&A data.

For more M&A data, check out Exitround Data, or subscribe to our newsletter (on the right side of this page).

What Do Buyers Want? The Exitround M&A Index

By on February 17, 2015

Buyers M&A Interests

Exitround has been amassing a range of data about the M&A industry. One area that we have been focusing our data efforts on is buyer interest. In other words, what are M&A acquirers interested in buying and what makes an acquisition most compelling to them? Exitround’s unique position in the industry gives us insight into “buyer intent” before buyers actually acquire those companies.

Today we’re posting a small sneak peak of some of this data, showing what the characteristics are of the most sought-after types of technology companies. This data is presented as blended indices of what is most in demand, using recent anonymized data from the Exitround platform. While this is just an initial slice of this data, we plan to soon release a fully detailed analysis of buyer interest and intent in the M&A industry.

As you can see from the index of the top product categories (above), mobile is the most sought-after category of company. However, big data, advertising technology, enterprise software and social media were also strong areas of interest for buyers. In terms of underlying technology, buyers were most interested Javascript, Ruby, and iOS and Android, as well as technologies often related to big data such as Hadoop, Java and MongoDB.

buyers-technologies-exitround
In terms of locations, companies that were most popular came from popular technology areas including the San Francisco Bay Area and New York City. However, other areas were popular as well, such as Los Angeles, London, Boston, Toronto, Denver, Austin, Chicago and Seattle.

Please stay tuned for more detailed reports to come. The data for this list comes from anonymized Exitround data. The data is normalized on a scale to 100. For more M&A data, please see Exitround Data.

This Week in Tech M&A — February 13, 2015

By on February 13, 2015

laser-288611_640Time for another round-up of tech mergers and acquisitions here on Exitround:

Acquisitions:

King buys Seattle gaming startup Z2 for up to $150 million, creating its first US studio.

WPP to acquire a “substantial” stake in comScore.

Microsoft reportedly paying $200 million to acquire N-trig, makers of the Surface Pro 3 pen.

Twitter buys social media talent agency Niche for at least $30 million.

Microsoft confirms that it has acquired Sunrise.

Canon offers $2.8 billion for network video camera maker Axis.

Expedia buys Orbitz for $1.6 billion.

GoDaddy is about to buy Node startup Nodejitsu.

Yelp buys delivery network Eat24 for $134 million to ramp up in food operations.

 

Funding:

August Capital raises $450 million for its seventh fund.

Apps search pioneer Quixey poised to raise $60 million from Alibaba, Twitter, SoftBank.

App marketplace maker AppDirect raises $50 million from Peter Thiel’s Mithril Capital.

New online marketplace Jet.com raises $140 million.

Reserve raises $15 million to help with your restaurant reservations and payments.

Google confirms that it put $900 million into SpaceX’s $1 billion round.

Lyft said to be in talks to raise $250 million funding round with a valuation of $2 billion.

 

Accelerator and incubator news:

500 Startups keeps its commitment to invest in women in tech.

Ford accelerates tech efforts with new Silicon Valley lab.

Microsoft has teamed with Y Combinator, giving $500,000 of Azure credit to its startups.

 

People:

Duo Security hires former Zendesk COO Zack Urlocker to run operations.

Dropbox replaces its insider CFO with former Motorola executive Vanessa Wittman.

Bigcommerce boosts expansion, IPO plans with new leadership.

Atlassian hires new CFO as it prepares for an IPO.

Jive Software names Elisa Steele its permanent CEO.

 

News:

Marissa Mayer has reportedly fired people at Yahoo.

With 500,000 users, Slack says that it’s the fastest-growing business app ever.

Google I/O 2015 registration to begin May 28-29.

The Twitter account of Twitter’s CFO was hacked.

 

Interesting reads:

How Sean Parker bounced back from being fired to change Facebook’s history.

Google added a puppy to its creepy robot family.

Facebook and LinkedIn join forces to help women in tech.

10 years of Google Maps, from Slashdot to ground truth.

How red-hot startup Fab raised $330 million and then went bust.

 

Photo credit: LoggaWiggler/pixabay

This Week in Tech M&A — February 6, 2015

By on February 6, 2015

lines-593191_640It’s the end of the work week so here’s a recap of this week’s tech M&A news roundup:

Acquisitions:

Home furnishing company Hem will reportedly acquire Italy-based furniture shop Discipline.eu.

Under Armour acquires MyFitnessPal for $475 million and Endomondo for $85 million.

Google buys Toontastic storytelling app.

Microsoft buys Sunrise calendar app for reportedly $100 million.

Staples buys Office Depot for $6.3 billion.

VMware buys Immidio to add more desktop virtualization tech to its portfolio.

Code School acquired by PluralSight for $36 million.

Fundable acquires mentorship service Clarity.fm as part of its new launch platform, Startups.co.

Rocket Internet puts $586 million into Delivery Hero and buys 9 other food startups.

Wearable World purchases ReadWrite from Say Media.

 

Funding:

Humor site Cheezburger raises $2.7 million and plans to launch a new comedy show about weed.

Fast-growing Zoom raises $30 million for online video conferencing.

Taboola gets $117 million from Comcast, other strategics to boost its content recommendation platform.

500 Mobile Collective makes its first investment in Andy OS to bring Android to the desktop.

AnyPerk, a platform for delivering perks to employees, raises $8.5 million in Series A funding.

 

IPO and accelerator news:

Here’s a look at 500 Startups’ 11th batch of companies following its Demo Day.

Yahoo’s small business unit draws the short straw in Alibaba spinoff.

Digital health accelerator StartUp Health adds six new companies to its portfolio.

TechCrunch’s top five startups at StartX’s Fall 2014 Demo Day.

 

People:

Former kbs+ Ventures director Taylor Davidson joins Venture for America as part-time Investor in Residence.

PayPal’s retail chief Don Kingsborough exits ‘a little frustrated’.

Foursquare’s Chief Technical Officer has left the company.

Google’s Senior Vice President of Knowledge Alan Eustace leaves the company.

Google Brain’s co-inventor Andrew Ng tells why he’s building Chinese neural networks.

 

Interesting reads:

Why no one takes the Crunchies seriously.

Uber wins the 2014 Crunchie for best overall startup.

3 reasons now is the time for female founders to land venture capital.

Twitter CEO: “We suck at dealing with abuse”.

The Uberpreneur: How an Uber driver makes $252,000 a year.

 

Photo credit: Geralt/Pixabay

Why Building A Great Company May Not Be Enough To Get Acquired

By on January 22, 2015

bokeh-lights-298304_1280The dream of many entrepreneurs is to build a successful business that can go public or be acquired for a large sum. While IPOs are hard to come by, acquisitions are more common.

The mantra is that good companies are bought not sold. In other words, the best companies are sought after and not desperate to sell. But how can startup founders or CEOs ensure that they’re the ones who are bought and not sold?

While the obvious path is to build a great company and great technology, that’s not always enough. There are a number of other things you can do, says Ajay Chopra, general partner at Trinity Ventures and former entrepreneur who has bought and sold companies. He has three main tips to help in this process.

Establish a presence

First, establish a presence in the market and in the public. You probably have the most expertise of anyone in your specific business or market, so don’t be afraid to share that with the world.

“You may have the world’s best technology but if nobody knows about you, they won’t be thinking about you,” says Chopra, who prior to Trinity Ventures was cofounder of Pinnacle Systems, which went public before it was acquired. “Entrepreneurs who create an outsized presence for their companies are usually rewarded.”

You don’t have to be on TechCrunch or Re/code every week. And this is not simply traditional PR or marketing. But being a speaker on industry panels, having a good blog, or being featured in important industry niche publications can be great, Chopra says. And, of course, you’ve got to be authentic and thoughtful, and not just shooting off random information.

Chopra, who has had seven exits out of his 16 or so venture investments (excluding seed deals), including Ankeena, 21Vianet, Green Throttle and TubeMogul, says companies that were more active in creating a public presence were ultimately more successful. “My CEOs who authentically just made it a part of their jobs to take meetings and built partnerships and get to know people in the ecosystem — they got much higher multiples,” he says.

You as a startup CEO want buyers to hear about you and come try to talk to you. For example, one of Chopra’s companies stole a $10 million account from a larger rival. That made the rival notice quickly and want to talk to his company. That’s a different and more specific way of establishing presence, but it is another way.

Partnerships

Secondly, partnerships are critical for building relationships that can develop into bigger acquisitions. This means thinking about which companies would be good to partner with and could benefit from this product or technology.

“What we notice is that a lot of the strategic acquisitions where companies pay or even overpay — many happen because the companies had previously engaged in partnership discussions,” Chopra says. “It’s very, very important to start thinking about this early — even around your seed round.”

If the larger company is a natural partner, it is fine for a startup CEO to reach out to engage in those discussions. The partnership is a great way to talk and get to know a potential acquirer without having the pressure of M&A discussions. You also don’t have to worry about looking desperate to sell as you could if you initiate M&A discussions.

Chopra estimates that 50 percent of acquisitions start with some level of partnership discussions. He cited Ankeena Networks, which got an investment from Juniper Networks as well as a partnership deal and then a year later was acquired by Juniper. “The partnership is almost like a trial period,” Chopra says. “They’re getting to know you and hopefully will fall in love with you.”

Talent

Third, talent is a key factor why companies acquire tech companies. Top talent can bring attention to a company even if it’s a relatively small company.

“If you hire high quality technologists or business people or a COO, those things make a difference,” Chopra says. “They’re respected in their industries and have connections to potential acquirers.”

Overall, as a potential seller you have to be in the mindset of the potential buyer. That means really understanding what they want and what you can do for them. “They’re not thinking, ‘This is a cool app and let’s buy it,’” Chopra says. “It’s really what’s the problem you’re solving for them.”

Some startup CEOs will go to meetings with potential buyers and only talk about their product and technology. “Corp dev is not interested in that. They’re concerned with, ‘I have a presence in the industry, but I have these major holes. Are you a real player who can help me stop worrying about this so I can worry about something else?’”

They might be interested in how many customers you have and who they are or which verticals your company is in. “Entrepreneurs like to talk about their product and how cool it is instead of what gap they’ll fill,” he says.

Post-Deal

While entrepreneurs can do all of the above to make their acquisition more likely and more successful, there is still the matter of making the acquisition work after the acquisition.

Acquisitions are major projects and many things can go wrong. When Chopra was buying companies at Pinnacle, his team would typically have a very detailed post-acquisition plan. This included many decisions, such as what to do with the different parts of the startup, including the finance team, engineering, sales, support and the CEO. Also, the buyer needs to figure out how the seller’s systems will integrate with its own. One of the most important things is human resources. If seemingly simple things like benefits and vacations are not resolved well, that can quickly kill morale in a team. But most acquiring companies ignore these issues, Chopra says.

Despite these plans a large number of acquisitions don’t work out. Chopra, who bought about 20 companies as a CEO, thinks that only about two of the acquisitions actually made an impact on his company. Both the buyer and seller need to have a very detailed understanding on what will happen after the acquisition, he says.

M&A Slowdown?

The M&A market has been exceedingly hot this year, but that may not last. Acquisitions are tied to stock market performance and the market could get weaker next year, especially in Q2, Chopra believes. Interest rates will be heading up, international markets have been and could continue to be shaky, and private company valuations have been very high.

There have already been some signs of weakness as two potential IPOs are targeting prices below their recent private company valuations, indicating more potential pull-backs to come. If the stock market does start to drop that could cause a slowdown in the M&A market.

Could those macro changes affect your startup M&A outcome? It’s a definite possibility, but if you try some of these tactics above, you could give yourself the best options when the time comes.

This post previously appeared on TechCrunch.

Photo credit: curtiscopeland/Pixabay

This Week in Tech M&A — January 16, 2015

By on January 16, 2015

kinetic-art-71765_640We’ve survived CES and that means the tech news engines are churning away once again. Here’s some of the things that have happened in the world of tech M&A:

Acquisitions:

Twitter reportedly in talks to acquire India’s ZipDial valued at between $30 to $40 million.

Alibaba may be buying a $550 million stake in online payment platform One97 Communications.

Tinder has acquired ephemeral messaging app Tappy.

Restaurant discovery service Zomato buys IAC’s Urbanspoon in a deal said to be valued between $50 to $60 million.

Capital One picks up spending tracker Level Money.

Citrix acquires Sanbolic to bolster its workload delivery.

Is Samsung thinking of acquiring BlackBerry for $7.5 billion?

Kabam acquires Los Angeles-based gaming companies TapZen and Magic Pixel.

Pay-TV tech company Synacor buys Web-TV startup NimbleTV.

Shutterstock acquires Europe’s largest independent photo press agency Rex Features and stock music and sound effects service PremiumBeat for $33 million and $32 million, respectively.

 

Funding:

India’s Zomato looks to raise $100 million following its acquisition of Urbanspoon.

Mobile engagement startup Accengage gets $3 million from OTC Alliance and the Mobile First Alliance

Instacart confirms that it’s raised $220 million for its grocery delivery service.

AppVirality grabs $465,000 for its easy-to-use referral tracking tool for app developers.

Facebook had discussed making an investment in Chinese smartphone maker Xiaomi most recent $1.1 billion deal.

Moovit, the Waze of public transit, raises another $50 million.

Video chat app Rounds raises $12 million in new funding round led by Sequoia.

Soylent grabs $20 million from Andreessen Horowitz, Lerer Ventures, others.

 

IPO, accelerator, and startup news:

Venture-backed M&A was still active in Q4 2014, but just not quite as hot. VC investing at the late stage stayed hot.

Online gaming company Kixeye holds large scale layoffs, cutting as much as 25% of staff.

MongoDB now valued at $1.6 billion.

Etsy plans an IPO this quarter, according to reports.

Y Combinator has revealed some data about the demographics of its accelerator.

For Dave McClure’s new 500 Startups fund, US institutions shy away.

Dating service Zoosk lays off 15% of its staff.

 

People:

Former Google Ventures general partner Wesley Chan joins Felicis Ventures as managing director.

Kevin Rose leaves Google Ventures to focus on North Technologies full-time, nabs $5 million funding round led by True Ventures.

Could Adam Bain be Twitter’s next CEO?

 

Interesting reads:

Chris Poole details how he shut down his startup, DrawQuest.

Fast Company: What a Y Combinator Tuesday night dinner session is really like.

Built in Los Angeles: Over $3 billion invested in Los Angeles tech in 2014, the highest funding total ever.

TechCrunch: Zenefits financials reveal it is one of the fastest-growing SaaS business ever.

Medium: The Era of Angels is Closing.

Semil Shah: Challenges facing the MicroVC model.

Harvard Business Review: Investors fawning over Uber should recall AOL’s stumbles.

Fortune: Is this the best performing VC fund ever?

 

Photo credit: PublicDomainPictures/pixabay

VC-backed M&A Takes A Pause While Late Stage Investing Stays Hot

By on January 15, 2015

Screen Shot 2015-01-14 at 1.36.51 PMVenture-backed M&A deal flow took a breather in the fourth quarter of 2014. At the same time, dollars invested into startups and funds raised by VC firms continued to increase in the quarter, according to data from Dow Jones VentureSource.

VC-backed M&A deal flow cooled in Q4 2014, with 102 deals, a 23% drop from the previous quarter. By dollars, companies sold for $32 billion in total, which was up 60% from the prior quarter. That figure however, was skewed somewhat by the closing of Facebook’s $19 billion WhatsApp deal.

Meanwhile, the number of VC investments into U.S. startups dropped after a scorching earlier part of the year, particularly seed deals, though dollars invested increased. VCs invested $13.8 billion in 814 deals in U.S. companies in Q4 2014. That’s up 24% in dollars despite a drop in 12% in number of deals from the prior quarter.

The number of seed deals dropped 40% from the prior quarter, and dropped 56% from the year-ago period. First round and second round deals also dropped. Only later stage deals stayed roughly the same as the prior quarter. Median deal size increased to $6.8 million in Q4 2014, from $5.0 million in the prior quarter and $4.18 million in the year-ago quarter.

The most active investors for U.S.-based companies were: New Enterprise Associates, Khosla Ventures, Andreessen Horowitz, Kleiner Perkins Caufield & Byers and Sequoia Capital.

Meanwhile, U.S. venture capital firms continued to raise capital for new funds. In the fourth quarter of 2014, 85 VC funds raised $8.1 billion, up 25% in dollars raised and up 4% in number of funds from the prior quarter. Overall, VC funds raised close to $33 billion in 332 funds in 2014, up 62% from 2013 by dollars and up 27% by number of funds.

Median pre-money valuations also continued to stay hot, increasing to $45.6 million in Q4 2014, from $35.0 million in the prior quarter and $21.63 million in the year-ago quarter.

This Week in Tech M&A–January 9, 2015

By on January 9, 2015

firework-17395_640It’s the first full week of the new year, which means it’s time for this week’s roundup of Tech M&A.

Exits

Facebook acquired Y Combinator startup wit.ai for its voice interface technology. Facebook also picked up QuickFire Networks, which reduces online video file sizes and upload speeds. Terms weren’t disclosed.

Video streaming company NeuLion is buying video compression outfit DivX for $62.5 million.

Gilead Sciences is paying $470 million for German liver disease drug outfit Phenex Pharmaceuticals.

Indian messaging app Hike is buying Y Combinator startup Zip Phone.

Aveva acquired Ireland-based 8over8 for EUR34.4 million.

Dun & Bradstreet has snapped up NetProspex, which helps manage professional contacts, for $125 million.

Lexmark International is buying medical imaging company Claron Technology for $37 million.

IPOs

Initial public offerings remained hot in Q4 2014, with the seventh straight quarter of more than 20 IPOs.

Box says it plans to raised up to $187 million in its IPO, after previously delaying its listing.

Big data IPOs are expected to be continue to stay hot in 2015. In December, New Relic and Hortonworks went public. This year, Dropbox, Palantir, Cloudera and Pure Storage are IPO candidates.

Data Points

The M&A market remained hot in Q4 2014, with the second-largest quarter for VC-backed M&A since 1994.

Hot Reads

500 Startups has raised $50 million of its $100 million target for its third fund. Dave McClure also includes IRR data about his first two funds.

Fred Wilson’s predictions for 2015.

Tomasz Tunguz analyzes the LinkedIn S-1 and its path to growth.

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VC-Backed M&A Spikes In Q4 2014 Paced By Facebook-Whatsapp Deal

By on January 7, 2015

stocksAcquisitions of venture-backed companies had the strongest quarter in Q4 2014 since the dot-com era, powered by Facebook’s $19.5 billion Whatsapp deal closing. Meanwhile, initial public offerings remained strong, notching an IPO record not seen since 2000, according to data released by NVCA and Thomson Reuters.

M&A

The fourth quarter of 2014 continued a hot streak for M&A, with the second largest quarter for venture backed M&A since 1994. The only other larger quarter was Q2 2000. Facebook’s $19.5 billion acquisition of Whatsapp (which closed in October) provided a major boost in the quarter. (Facebook also earlier in July purchased Oculus VR for $1.9 billion.) Johnson & Johnson made the second largest acquisition of the quarter, paying $1.8 billion for Alios BioPharma.

There were 95 M&A deals in Q4 2014, with 29 disclosed deal prices totaling $26.4 billion. That’s up 307% in dollars from Q3 2014 and 396% from the year-ago period. By number of deals, however, Q4 2014 was down from a busy Q3 2014 from 133 to 95, although it ticked up slighted from the year ago quarter of Q4 2013 from 93 to 95.

During 2014, there were 455 M&A deals, making 2014 the best year for VC-backed M&A since 2012.

Even without including Facebook’s massive Whatsapp deal, 2014 still totaled $26.5 billion in disclosed M&A dollars, which is up 57% from 2013 and the biggest year for US VC-backed M&A since 2007.

IPOs

There were 27 VC-backed IPOS generating $4.4 billion in Q4 2014, up 17% by deals and up 68% by dollars from Q3 2014. IPOs stayed hot in the fourth quarter of 2014, with the seventh straight quarter of 20 or more VC-backed IPOs, which hasn’t happened since the dot-com era in Q4 2000.

Life sciences made up 16 of the 27 deals in the quarter. Biotechnology in particular had a strong year, with 59 biotech deals in the full year 2014 – the strongest year for the sector since 1994. Twenty of the 27 companies to list in Q4 2014 are trading at or above their offering prices.