Fewer US based venture backed companies exited in 2011 than the year before, but those deals resulted in more cash, according to a recently released report by Dow Jones VentureSource.
Despite fewer exists, the year netted investors more capital thanks to a spike in the median price for M&A and buyouts, as well as the median amount raised in IPOs.
In 2011, there were 522 exists of venture backed companies in the US, a four percent deal drop compare to 2010. At the same time, the netted capital increased 26 percent in 2011, billion compared to the previous year. The year resulted in exits that netted $53.2 billion, despite a 14 percent drop in deal activity.
“Despite a slower acquisition pace capped with an uncharacteristic drop in deal activity in the fourth quarter, there are some positive signs heading into the new year.,” said Jessica Canning, global research director for Dow Jones VentureSource. “Acquisitions of companies liquidating their assets were halved in 2011 and companies are benefiting from lower start-up costs by taking capital farther toward a larger acquisition,.”
While companies required more money to reach an exit, they got there faster in 2011 than the previous year. Forty-five companies raised $5.4 billion through IPOs in 2010, considerably more change than the 3.3 billion raised by 46 IPOs in 2010. Much of that success is thanks to Groupon and Zynga, raising a combined $1.7 billion through their IPOs.
“The IPO market saw some gains through the first half of the year, but the momentum was not strong enough to survive the volatility in August,” said Zoran Basich, editor of Dow Jones VentureWire. “During 2012 we’ll get a sense of whether the last two years of flat IPO activity is the new normal for the industry or if there’s room to grow.”
The median price paid for a company also increased a whopping 77 percent over the previous year.
To reach an M&A or buyout, companies raised a median of $17 million in funding, 12 percent less than 2010, with an average 5.3 years to build the company, just under 2010′s average of 5.4 years.
Also noteworthy, the acquisition activity of the fourth quarter did not outpace the third in 2011 for the first time in five years. The fourth quarter of 2011 actually turned out to be the least active of the year.
Throughout 2011, corporate acquirers purchased 460 companies for $46.4 billion, representing a 13 percent drop in M&A activity and a 30 percent increased from the 528 deals that raised $36.6 billion in 2010.