VC-Backed M&A Rises In Q3 2015

By on October 1, 2015

Venture capital-backed startups had a healthy third quarter for M&A liquidity, with M&A deals jumping, despite not reaching the levels of last year. However, IPOs dropped in the quarter, as market volatility came to the fore.

There were 90 VC-backed M&A deals in the third quarter of 2015, up 21.6% from 74 deals in the prior Q2 2015 quarter, according to the National Venture Capital Association and Thomson Reuters. Of those, 20 disclosed deal value of $5.09 billion, which was up 39.5% from $3.65 billion in Q2 2015.

While M&A deals jumped in the third quarter on a sequential basis, M&A liquidity was still not as high as the year-ago quarter, which was extremely hot. The number of deals in Q3 2015 was down 33.82% from 136 deals in Q3 2014, and by disclosed dollars was down 40.745% from $8.59 billion. Overall, there has been $10.93 billion in disclosed M&A value in the first three quarters of 2015, compared to $20.35 billion during the first three quarters of 2014.

Initial public offerings, meanwhile, dropped to 13 VC-backed IPOs in Q3 2015, down 55% from 29 in Q2 2015. IPOs generated $1.7 billion in Q3 2015, down 54% from $3.79 billion generated in Q2 2015.

What This Means For Startups

M&A deals are still getting done, but IPOs have been harder to get out. And there are not as many merger and acquisition deals getting done as there were last year, continuing a recent trend. In particular, larger billion-dollar exits are harder to come by lately. That could present problems for venture capitalists who need to return capital to their limited partners. The harder it is for venture capitalists to return capital, the more likely it is that these investors will be more cautious investing in new companies. So startups that are raising new capital could see the effects of this. At the same time, smaller “boutique” deals are still getting done, as we’ve seen at Exitround.

By sector, information technology led with 69 of the 90 deals. Within IT, software and Internet made up 47 and 17 deals, respectively.

The largest VC-backed M&A deal was EMC Corp.’s $1.2 billion acquisition of Bethesda, Maryland-based cloud company Virtustream. The second-largest M&A deal was Oakland, CA-based Gt Nexus Inc., which was purchased for $675 million by Infor Inc.


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