Tech M&A Hits 20-Month High

Recently, I wrote a story about the return of risk-taking to the U.S. technology sector. The story included M&A data that was current through Sep. 23. Well, I just got a hold of the numbers for the entire month, and they are impressive. All told, in Sep. 2009 there were 365 tech deals worldwide worth a total of $27.2 billion, according to Thomson Reuters. That is the most amount of tech deals since December 2007, when there were $27.3 billion worth of deals.

It may take a while longer to surpass the next biggest month in tech M&A, which was October 2007, when there were $37.7 billion worth of tech deals. But with big tech companies such as Cisco Systems on an acquisition rampage, we may get there sooner than you think. In the first two weeks of October, Cisco has already announced two deals worth $5.9 billion.

Here’s a spreadsheet with data from Thomson Reuters showing the last 20 months of tech M&A activity.

Sep 2009 Technology Mergers & Acquisitions

Summer Bummer: U.S. DealMaking Hits 15-year Low–IPOs Back from the Dead

The latest August 2009 deal figures are out by Thomson Reuters and they ain’t pretty.

U.S. monthly M&A activity has hit a 15-year low, with just $13bn in deals for the month. Bankers who hit the Hamptons this month didn’t miss much.

Good news is that debt and IPO markets are strengthening.

High-yield issues, meanwhile, have been met with continued investor appetite, with global high-yield bond volume seeing a 5-year weekly high of $8.9bn the week of August 9. Financial issuers are also returning to the debt markets without government guarantees, accounting for 50% of all new issues in August. Meanwhile, the robust IPO market has seen five consecutive months of multi-billion dollar offerings on global exchanges, including Everbright Securities in China and and National Hydro Electric Power in India.

Click here for the full release on M&A with pretty charts and graphs.

New Venture Capital Investment Nearly Comes to a Halt

It’s official: Institutional investors have put the kibosh on investing in new venture capital funds, though established firms with track records have been able to scare up some money. That’s the big news out of today’s announcement about fund raising trends in the first quarter of 2009 from Thomson Reuters and the National Venture Capital Association.

In the quarter, 40 venture capital funds raised $4.3 billion, down 40% from the first quarter of 2008 when 71 funds raised $7.1 billion. It was the smallest number of venture funds to raise money since the third quarter of 2003. The biggest shocker? Of those 40 funds, only 3 of them were new funds; the other 37 were raised by existing venture firms.

Read the rest of the post on BW’s TechBeat here.

Venture Capital Funding Enters Deep Freeze

It’s official: The venture capital market is freezing up. And don’t expect the market to warm up any time soon.

In the fourth quarter of 2008, venture capitalists raised only $3.37 billion, down a staggering 71% from the year-ago quarter, when VCs raised $11.67 billion, according to a January 20 release by Thomson Reuters and the National Venture Capital Association. This is the smallest amount of money raised since the second quarter of 2004, when VCs raised $3.3 billion.

The size of the average fund and the number of funds able to scare up capital is also rapidly shrinking. In the fourth quarter, 43 funds accounted for that $3.37 billion, down from 84 funds in the year-ago period. That is the smallest amount of funds raised since the third quarter of 2003, when 33 funds raised $1.8 billion.

The shrinking amount of capital means that fewer new companies will get financing, and that older startups without market traction are likely to wither away.

“With some notable exceptions, we can expect this slower pace to continue well into 2009,” said Mark Heesen, president of the NVCA in the press release.

After years of waiting for an industry shakeout that never happened, many VCs now expect the industry to shrink significantly since some institutional investors are pulling back from the venture capital asset class. “There are likely to be fewer firms over the next few years,” says Ira Ehrenpreis, general partner with Technology Partners, a firm based in Palo Alto, CA. “And that’s a good thing. A pruned tree will be healthier.” Ehrenpreis believes the industry could shrink by as much as 20%.

Another silver lining: The largest and most successful VC firms continue to be able to raise large war chests. Two of the three largest funds raised in the fourth quarter were by Accel Partners, a well-established firm that has invested in Facebook, JBoss, MetroPCs and many other prominent startups.

Accel raised an Accel Growth Fund with $480 million to invest in more mature new companies. It also raised Accel London III with $525 million to invest in young European startups.

What Capital Crunch?

The latest fundraising figures from the National Venture Capital Association and Thomson Reuters suggest that the economic slowdown is not deterring VC investment.

Here’s a snippet from the story I wrote today for BusinessWeek Online:
“There’s no capital crunch in Silicon Valley.

Despite turmoil in the stock market, jitters about mortgage financiers Fannie Mae (FNM) and Freddie Mac (FRE), and the worst market for initial public offerings in decades, big investors continue to pour money into venture capital funds

Some 71 venture capital funds raised $9.1 billion in the second quarter of 2008, up 3% from the year-ago quarter, according to a survey released July 14 by Thomson Reuters (TRI) and the National Venture Capital Assn. Investments in information technology, life sciences, and environmental technologies continue to drive the market. As the venture capital market becomes more global, Asia is emerging as an attractive location for investments.

The latest numbers signal that big investors are confident in the long-term future of the venture capital business. There does seem to be a flight to quality, however. The number of funds raised in the quarter fell 14%, down from 83 in the year-ago period. ”

Check out the rest of the story here. It is based on several interviews with VCs and limited partners.