By Sean Wolfe

A ripe mergers and acquisition market for information technology companies is helping to boost valuations for venture-backed companies.

A year of seeing IT giants like Oracle, IBM, and Red Hat snap up companies at premium prices sent median pre-money valuations for IT companies soaring to $22 million in the third quarter of 2006, according to the latest report from Dow Jones VentureOne.

That skewed the curve a bit for other venture-backed companies, which are being valued almost twice as high as they were a year ago—up to $20.6 million from $11.8 million in the year ago quarter.

That’s a slight dip from Q2-06, when the median hit $21 million, the highest quarterly level since 2000.

Steve Harmston, director of global research for VentureOne cited IT companies finding M&A to be the exit strategy of the moment as a booster-shot for median valuations, adding that it was having a coat-tail effect on companies that are still private.

Within IT, semiconductor and communications companies got most of the glory—setting the highest median valuations at $25 million each.

The health care sector—which historically runs counter-cyclical to IT—suffered, with flattening valuations at the pre-money median of $16.6 million—close to prior-year levels. Within health care, medical devices felt less pain than biopharma, dropping to $16.7 million from $17.9 million. Biopharma median valuations dropped to $12.5 million from $15.9 million in the year-ago quarter.Later stage biopharma was the major exception, posting the highest median valuations of the quarter at $66.3 million.

Later rounds for all industries showed significant uptick in median valuations.Companies completing later rounds got a median valuation of $37.1 million, up from $30 million in the year-ago quarter.

The slump in biopharma valuations hasn’t harmed venture capital interest in the sector, which bagged $3.2 billion in the first three quarters of 2006, coming in at second place for the period, just slightly under the $3.7 billion snared by the software sector over the same period.The telecommunications, with over $2 billion during the first three quarters of 2006 picked up the bronze.