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By Matthew Quinn
The fourth quarter saw U.S. venture-backed companies begin reversing the trend that saw severely depressed liquidity levels through the first three quarters of 2009. During the last three months of 2009, corporate acquirers snapped up 86 companies for a total $7.3 billion, up almost 50 percent compared to a year earlier, according to a report released Monday by industry tracker Dow Jones VentureSource.
That's a vast improvement from the third quarter when M&A raised just $2.25 through the sale of 71 companies, down 56 percent from the same period in 2008.
VC-backed companies still had a tough go of it in the public markets, but conditions were much improved compared to 2008. During the fourth quarter, there were just three initial public offerings, which raised $220 million. For the full year 2009, eight companies completed public offerings, raising $904 million, a 64 percent increase from the $551 million generated through seven IPOs in 2008.
The year's largest IPO was the $371 million offering by A123 Systems, a provider of rechargeable lithium ion battery systems, in late September. The fourth quarter's largest IPO was an $80 million offering by Echo Global Logistics, a transportation management solutions provider, in October. There are currently 25 venture-backed companies in IPO registration, Dow Jones said.
During 2009, venture-backed companies generated $17.1 billion in liquidity, either through IPOs or being acquired. That's 34 percent less than the $26.1 billion produced in 2008.
But there is substantial momentum heading into 2010: Forty-four percent of 2009's total liquidity was generated in the fourth quarter.
"The fourth quarter has set the stage for an active year in M&As in 2010," said Jessica Canning, director of global research for Dow Jones VentureSource. "As the economy improves, acquirers are gaining confidence in their own financial situation and returning to strategic acquisitions. At the same time, the steady trickle of public offerings is teasing investors who expect the IPO window will re-open in the coming year."
For the full year 2009, 326 M&A transactions garnered $16.2 billion, a 37 percent drop from the $25.6 billion raised through 380 deals in 2008.
The largest M&A deal for both the quarter and the year belonged to Zappos.com, an online shoe and clothing retailer, which was acquired by Amazon.com for $847 million.
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