M&A in venture is down 25%

Dow Jones VentureSource just released their Q3 quarterly findings which includes data on M&A activity among venture backed companies.  The data is shown quarterly, but we prefer to look at it on a last-twelve-months basis so as to remove seasonality and account for major M&A events impacting a particular quarter.  As the data shows below, M&A is down significantly in the last twelve months, totaling 587 deals with an aggregate value of $69bln.  This is 25% below the prior LTM period of $92bln and 12% below the Q3 2015 LTM period of $79bln.  The average deal size has also shrunk materially to $118mm from $156mm in the prior LTM period and $147mm in the period two years ago.

 

  LTM LTM LTM
  Q3 2015 Q3 2016 Q3 2017
M&A Deals 537 591 587
M&A Dollars ($mm) $79,070 $91,990 $69,270
YOY Change --- 16% -25%
Avg Size ($mm) $147 $156 $118
       
IPO 77 46 40
IPO Dollars ($mm) $8,250 $3,520 $7,000
YOY Change --- -57% 99%
Avg Size ($mm) $107 $77 $175

 

So what’s the meaning of the low dollar amount and deal size relative to prior years? For your startup this could mean nothing – every deal is different with valuations being driven by any number of unique factors.  But generally speaking, if you’re selling your business or raising capital, you’d prefer to see lots of deals being done with more money pouring into M&A.  More money chasing fewer deals means higher valuations. 

 

On the flip side, deal size coming down from $156mm to $118mm could be an indication that buyers are willing to acquire smaller companies, meaning the critical mass you need to achieve for exit may have come down a bit. 

 

Hopefully these metrics improve in coming quarters. 

 

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