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Mergers and acquisition activity increases
Venture-backed exits, which primarily consist of mergers and acquisitions, were down by approximately fifty per cent during the third quarter. However, there is evidence to suggest that mergers and acquisitions activity is actually on the increase.
TechCrunch keeps data on all announced acquisitions. Based on the figures they have, during the third quarter $45.1 billion worth of acquisitions were announced. This is a three-fold increase from the $15.4 billion in the three months, which went before and quadruple the low of $7.6 billion from the fourth quarter, which was an increase of nearly 25 per cent from the year before.
Larger acquisitions accounted for a large chunk of these figures. Many of these included companies trading on the stock market, for example the purchase of Perot Systems by Dell for $3.9 billion, Affiliated Computer Services bought by Xerox for $5.75 billion and Adobe acquiring Omniture for $1.8 billion. Biotech and pharmaceutical deals were also prevalent, such as Dainippon Sumitomo acquiring Sepracor for $2.6 billion and the merger of Abbott Labs with Solvay Pharmaceuticals for a hefty $6.6 billion.
The quantity of mergers and acquisitions has stagnated around the 210,000 over the past four years. However, the value of these acquisitions has substantially increased. The average of each deal has actually increased by 85 per cent from the same period last year. During the third quarter the average value of each merger and acquisition deal was $349 million. Buyers appear to be more cautious about making deals but once they decide to continue, it would appear that they are willing to spend larger quantities of money. This is particularly the case when dealing with companies who are established with a proven track record. This accounts for the increased spend on publicly traded companies.
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