SAN JOSE, Calif. – Mergers and acquisitions cooled in the last quarter as activity in public offerings heated up, according to a report from Dow Jones VentureSource.
Overall 109 venture-backed companies went through some form of public or private sale in the second quarter of 2011, raising a total of $11.2 billion, up 26 percent from money raised in the second quarter of 2010, according to Dow Jones VentureSource.
"Deal-making is in a limbo--unstable global markets and sky rocketing IPO valuations are giving both acquirers and companies sufficient cause to wait," said Jessica Canning, director of global research for Dow Jones VentureSource. "Everyone is watching the performance of recent IPOs to see how justifiable valuations really are," she said in a press statement.
Fourteen startups went public in the second quarter, raising $1.7 billion, up in total value from 15 IPOs that raised $859 million during the same period last year. IPO activity is tracking ahead of the first six months of 2010, and or the first time since 2007 the number of IPOs per quarter has been in double-digits for three consecutive quarters, Canning said.
Currently, 45 U.S. startups are in IPO registration.
"IPOs have been steady but the window has yet to fling wide open," said Scott Austin, editor of Dow Jones VentureWire. "Despite talk of tech bubbles and excitement around offerings from Internet companies like LinkedIn and Pandora, macroeconomic issues could keep a tight hold on the IPO window as investors may be encouraged to stick with safer securities," he said.
The median amount of venture capital raised prior to an IPO rose 55 percent to $109 million in the second quarter of 2011. The median amount of time it took a company to reach liquidity fell to 8.6 years from 9.3 years in same period last year.
The rise in IPOs has cooled mergers and acquisitions. In the second quarter, acquirers bought 91 companies for $9.2 billion, a 13 percent drop from the same period last year when 105 acquisitions spent a total of $7.2 billion.
Information technology was the most active area for acquisitions with 38 M&As raising $3 billion. Consumer Services, including consumer Web companies, was the second most active sector with 21 companies purchased for $2.1 billion.
Most M&As involved corporations buying startups, but eight startups sold themselves to other venture-backed companies, accounting for nine percent of the quarter’s M&As.
To reach an M&A or buyout, companies raised a median of $19 million in venture financing, on par with the same period last year. They took a median of 5.6 years to build their company, slightly more time than the 5.5-year median in the second quarter of last year.