Study: VC-backed mergers, IPOs slowing

The number of venture-backed mergers and acquisitions in the first three months of 2008 hit an all-time quarterly low for the decade, according to a new report from Thomson Financial and the National Venture Capital Association. Internet-related deals dominated the pack.

In the first quarter of 2008, the association reported that there were 56 venture-backed deals, 41 deals of which were related to information technology. (The biggest deal was Dell's $1.4 billion buyout of EqualLogic, a provider of storage area network solutions.) Those 41 mergers or acquisitions had a disclosed dollar value of about $2 billion total, according to the study; and Internet-related deals accounted for about $1.7 billion of that.

The average disclosed deal value for the quarter was $124.6 million, the study said.

The NVCA also reported that VC-backed IPOs in the first quarter of 2008 dropped to lows from 2003. It estimated that there were only five VC-backed public offerings for a total of $282.7 million in the first quarter, compared with two IPOs reported in the second quarter of 2003.

"U.S. economic uncertainty clearly impacted the venture-backed IPO market in the first quarter," NVCA President Mark Heesen said in a statement.

He added: "While the acquisitions market is also showing lower volumes, the quality of exits--both IPO's and acquisitions--appears to be holding up, which should translate into some much needed confidence for venture backed companies looking to exit in 2008."

[StonyCrane]

few good ideas

Hearing that there are few good ideas around is laughable. There are plenty of ideas out there and many are good, but they simply don't fit into the preceived hot areas, even when those hot areas don't actually generate cash flow of any significance.

When companies don't generate their own cash flow, they don't have the ability to raise capital on the public market, which is bad now, unless you consider Visa, so they therefore look to M&A as an exit vehicle.

A final thought on good deals, many experienced entrepreneurs don't want to do another company since they are often squashed to such a low ownership position that they feel it is not worth the 70 hour weeks.

The fact that we talk about hot areas, instead of good ideas, is ultimately the problem with today's institutional venture capital.