Venture-backed companies see year-end surge

Fourth-quarter acquisitions and a smattering of IPOs throughout 2009 reflect rising confidence that bodes well for 2010, according to Dow Jones VentureSource.

Battery maker A123 Systems in late September scored the biggest IPO among venture-backed companies in 2009, helping boost the overall value of such initial public offerings markedly from the preceding year.

Amazon's acquisition of Zappos , which closed in November, was the biggest takeover of a venture-backed company in 2009.

That economic activity from the final months of the year is grounds for optimism about 2010, according to industry tracker Dow Jones VentureSource.

"The fourth quarter has set the stage for an active year in M&As [mergers and acquisitions] in 2010," Jessica Canning, director of global research for Dow Jones VentureSource, said Monday in a statement recapping 2009's activity in private markets. "As the economy improves, acquirers are gaining confidence in their own financial situation and returning to strategic acquisitions. At the same time, the steady trickle of public offerings is teasing investors who expect the IPO window will re-open in the coming year."

The $7.3 billion raised by mergers and acquisitions in the fourth quarter was a 49 percent jump from the $4.9 billion seen in the same quarter in 2008.

Still, 2009 overall was a down year for mergers, acquisitions, and IPOs of venture capital-backed companies in the U.S. For the year, only $16.2 billion was generated from 326 mergers and acquisitions, a 37 percent drop from the $25.6 billion raised through 380 mergers and acquisitions in 2008, according to Dow Jones VentureSource.

The largest acquisition for both the year and the final quarter was that of Zappos, an online shoe and clothing seller, which was scooped up by Amazon for $847 million.

Eight new IPOs, meanwhile, managed to raise $904 million in 2009, a 64 percent jump from the $551 million generated by seven IPOs in 2008. The year's largest IPO was in the green-tech sector , as Massachusetts-based A123 Systems, a maker of rechargeable lithium ion batteries, raised $371 million. The largest IPO in the fourth quarter was the $80 million generated by Chicago-based Echo Global Logistics, which provides technology to companies in the transportation industry.

Prices paid for start-ups backed by venture capitalists also grew in the fourth quarter, according to VentureSource. For the first time since 2000, the median price paid for a venture-backed firm shot past $100 million, hitting $145 million, almost eight times higher than the $19 million median paid during 2008's final quarter. But the $27 million median price for 2009 overall was 18 percent less than for the previous year.

"Several large deals spurred a dramatic increase in the median amount acquirers paid for a company during the fourth quarter," Canning said in a statement. "But the median amount paid throughout 2009 was still below the levels seen in 2007, a positive sign for acquirers looking to purchase companies at reasonable prices."

About the author

Journalist, software trainer, and Web developer Lance Whitney writes columns and reviews for CNET, Computer Shopper, Microsoft TechNet, and other technology sites. His first book, "Windows 8 Five Minutes at a Time," was published by Wiley & Sons in November 2012.

 

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