The data found that, in contrast, mergers and acquisitions (M&As) dipped to their lowest quarterly total since 2003, with only 81 companies completing M&A transactions, garnering $7.5 billion. That is down from the 110 transactions and $7.9 billion paid for companies in the second quarter of 2006.
"We've heard a number of venture capitalists voice their optimism for taking companies public over the next two to three years and our data shows that, for the first time since 2000, we may be seeing a shift in exit strategy," said Jessica Canning, director of global research for Dow Jones VentureOne. "More venture-backed technology companies are opting to take advantage of the favorable IPO market and compensating for the slight downturn in the number of overall mergers and acquisitions, which had been the most common path to liquidity for several years. At the same time, health care companies are being sold for record amounts."
Among the 10 technology IPOs in the second quarter, the median amount these companies raised in equity prior to going public was $67.4 million, up sharply from $39 million median in the same quarter last year. The data also found that the median pre-money valuation for a technology IPO was $452.4 million, a big improvement over the $254.4 million median in the second quarter of 2006.
The largest IPO of the quarter was the $862.5 million IPO for Dallas, Texas-based MetroPCS, which provides wireless services in select major U.S. metropolitan areas.
The overall median pre-money valuation for IPO companies reached $320.2 million, the highest level since the third quarter of 2006, while the median amount the IPO companies raised prior to going public also increased to $80.7 million. The median time for these companies to go from initial equity financing to IPO remained virtually unchanged from the same period last year at 6.1 years.
The report showed that technology companies accounted for 59 second- quarter M&A transactions, nearly three-fourths of the total companies sold in the quarter. There were 11 health care companies sold during the quarter as well as nine acquisitions of companies in the business, consumer and retail category and two in the energy sector. For all industries, the median purchase price in the second quarter of 2007 was $55.8 million. That is down from the $90 million median price in the first quarter of the year but still ahead of the $41 million price in the second quarter of 2006. According to historical data, these numbers show M&A prices at roughly the same levels seen in 2006.
However, for the second quarter in a row, investors saw impressive returns from the sale of health care companies. Despite raising a median of $77 million in equity prior to M&A-a record amount-the median amount paid for a health care company was $184 million. That is the second-highest median price on record, bested only by the $268 million median from the first quarter of 2007.
The quarterly data also shows the median price paid for technology companies reached $50.8 million compared to the $22.9 million in equity raised prior to being sold. The median amount raised in equity for all companies prior to acquisition in the second quarter was $27.2 million, the second- highest quarterly median on record.
The time between initial equity financing and M&A also reached its highest level ever at 6.5 years, up from the 6.0-year median from the same period last year.
The largest venture-backed M&A of the quarter was Microsoft's $800 million purchase of Mountain View, California-based Tellme Networks, a Voice-over IP (VoIP) provider that lets users access consumer and business information on the Internet by speaking directly into their phone.
