The public markets showed a strong appetite for the initial public offerings (IPOs) of U.S. venture capital companies in the first quarter, while the pace of mergers and acquisitions slowed, according to Dow Jones VentureSource.
Twenty companies held IPOs during the first quarter of 2012, making it the most active quarter for IPOs since the fourth quarter of 2007 and the most active first quarter since 2000.
During the same period, 94 companies were acquired, the second-straight quarter of declining deal volume for M&As.
Greater stability in the public markets, more corporations opening venture units to work closely with startups without acquiring them, and a continued disconnect between entrepreneurs' asking price and what corporations are willing to pay have contributed to a steady decline in M&A activity, Jessica Canning, global research director for Dow Jones VentureSource, said Monday in a statement.
Small- and Mid-Cap IPOs Take Center Stage
Twenty companies raised $1.4 billion through public offerings in the first quarter, significantly more IPOs and significantly more money than the 11 IPOs that raised $768 million during the first quarter of last year.
Big (IPOs) by Groupon and Zynga dominated the end of 2011, but small- and mid-cap IPOs have taken center stage so far this year, Zoran Basich, editor of Dow Jones VentureWire, said in a statement. The public markets proved receptive to a broad range of companies, which is a positive sign for the industry.
Currently, 50 U.S. venture-backed companies are in IPO registration. Thirteen of those companies filed during the first quarter.
It took companies a median of $68 million and 7.7 years to reach an IPO. That represents a 22 percent drop in capital raised but an increase in time from 6.2 years during the same period a year ago.
Google Sits Out As Groupon Steps Up
Google, which was the most active acquirer of venture companies in 2011 with 12 acquisitions, did not buy any companies in the first quarter of 2012.
Groupon, however, has been snapping up venture companies at a pace that rivals Google's in 2011. Flush with cash after raising $700 million through its November IPO, Groupon acquired six venture companies in the first quarter, double the three acquisitions the company made throughout 2011.
To reach an M&A or buyout, companies raised a median of $13 million in venture financing, 13 percent less than in the first quarter of 2011, and took a median of 4.9 years to build their company, slightly more time than the 4.6-year median a year earlier.
Ninety-four mergers, acquisitions and buyouts raised $18.1 billion in the first quarter, a 32 percent decrease in deals and 42 percent increase in capital raised from the same period last year. The median price paid for a company spiked to $190 million from $43 million in the first quarter of last year.
Shares of Google Inc. (Nasdaq: GOOG) rose $2.03, to $643.27 a share in Monday morning trading.
Shares of Groupon Inc. (Nasdaq: GRPN) slumped 12 percent, to $16.21 per share, after Groupon revised its fourth quarter earnings results. The company said its previously reported net loss for the fourth quarter of 2011 increased by $22.6 million, while revenue was revised lower by $14.3 million.
In February, the company posted a net loss of $42.7 million, or 8 cents per share, on revenue of $506.5 million for the fourth quarter. The revised net loss was $65.4 million, or 12 cents per share, on revenue of $492.2 million.