Venture Backed M&A Activity Continues To Increase Amid Lethargic IPO Market

Business Wire, August 14, 2001

Business Editors

NEW YORK--(BUSINESS WIRE)--Aug. 14, 2001

According to Venture Economics and the National Venture Capital Association, venture-backed mergers and acquisitions activity increased for the second straight period last quarter, as 76 deals were completed for $2.02 billion. However, due to the significant decrease in high technology company valuations, the total reported value of such transactions declined significantly in Q2, to $61.32 million from $218 million in the first quarter.

                                   Deals w/    Avg Val     % of Deals
             Total       Sum       Disclosed   Per Disc     w/ Value
Quarter      Deals    Value $(M)    Values     Deal ($M)   Disclosed

Q2 2001        76     2,023.6         33        61.3           43
Q1 2001        63     6,984.6         32       218.3           51

Q4 2000        46     9,537.1         28       340.6           61
Q3 2000        62     7,013.4         40       175.3           65
Q2 2000        86    25,914.7         54         478           63
Q1 2000        81    24,995.4         55       454.5           67

Q4 1999        65    21,807.6         48       454.3           74
Q3 1999        56     6,273.2         38       165.1           68
Q2 1999        57     5,069.5         37         137           65
Q1 1999        50     2,819.9         30          94           50

Total 2001    139     9,008.2         65          -            46
Total 2000    275    67,460.8        177          -            64
Total 1999    228    35,970.3        153          -            67

Thomson Financial/Venture Economics & National Venture Capital
Association



            Venture Capital Backed Companies Exit Summary

   Period   # M&A   #IPO      Total   Value of    Value of     Total
            Exits   Exits     Exits   M&A Exits  IPO Based     Value
                                        ($B)     on Shares    of Exits
                                                 Offered ($B)   ($B)
   1996      115       276      391      8.5        11.8        20.3
   1997      159       136      295      7.8         4.9        12.7
   1998      197        77      274      9.2         3.8        13.0
   1999      228       258      486     36.0        19.9        55.9
   2000      275       258      533     67.5        24.6        92.1
YTD2001      139        21      160      9.0         1.7        10.7
  Total    1,113     1,026    2,139    138.0        66.7       204.7

Thomson Financial/Venture Economics & National Venture Capital
Association

"The increase in M&A activity this quarter underscores the importance of the FASB pooling issue, which was resolved to the satisfaction of the venture industry and financial community. The vitality of the M&A markets is critical to the venture capital industry," stated Mark Heesen, president of the National Venture Capital Association.

These most recent figures offer a stark contrast to one year ago, when M&A exits peaked in the second quarter. In that period, when 86 deals were closed, a total value of almost $26 billion was reported, averaging $454 million per transaction. In the quarters leading up to that apex all indicators moved in unison, as deal volume, total values, and average deal sizes all increased simultaneously. Since then, however, venture-backed M&A transactions have followed a jagged, erratic path as volume and value totals have either increased or decreased inversely proportional to each other.

"Ultimately, liquidity is crucial to private equity investors. Robust M&A and IPO activity are paramount to successful performance in the venture capital industry. M&A activity this year appears to be taking up some of the slack left by the dearth of IPOs," commented Jesse Reyes, Vice President, Venture Economics. "With valuations of technologies continuing to fall from their pre-crash highs, there are more deals on the table at reasonable prices. But it is a two-edged sword: Lower prices means lower exit values and thus lower overall performance."

                                                Sum of Deals
                                      Total     w/ Disclosed
Industry                              Deals       Value ($M)

Biotechnology                           3            51.7
Communications and Media                9           811.9
Computer Software and Services         15            72.8
Consumer Related                        3               -
Industrial/Energy                       2             107
Internet Specific                      34           413.7
Medical/Health                          4             9.7
Other Products                          2              22
Semiconductors/Other Elec.              4           534.8

The Internet Specific industry category represented the largest volume of venture-backed M&A activity. This is not surprising, considering the appetite of the public markets for Internet companies has fallen considerably during the past year, leaving the M&A market the only opportunity for venture capitalists to earn a return on some of their Internet Related investments. In keeping with trends of the previous two years, venture-backed M&A activity in the second quarter of 2001 was dominated by the communications, Internet, software, and electronics components sectors. In terms of deal volume, the first three industries mentioned accounted for 76% of the activity, with the Internet far outpacing all others with 34 deals.