M&A Trends Boost Prospects for Venture Returns

According to Venture Source, median prices paid in 2004 for Venture-backed companies have returned to the $40 million level, up sharply from $22 million in 2003. This is based on 376 transactions reported. This compares favorably with an average of $22 million raised prior to M&A. It took longer, over 4 years, for those companies to reach exit, on average.

We see a healthy balance of supply and demand to fuel more M&A activity at even higher prices. On the supply side, more private companies are nearing or reaching profitability with revenues that can be attractive to public companies. Public companies have richer stock currencies and a need to buy growth by adding new technologies to exploit existing distribution.