Cloud, Internet Deals Dominate M&A Scene

Large technology companies may be holding record amounts of cash. So far, however, there’s little indication they plan to spend more of it buying venture-backed startups.

Such are the findings from a survey of transactions with disclosed valuations announced in July and the first half of August.

Still, there were several transactions with announced valuations above $200 million, including a few in the Internet space.

One was Zong, provider of a service that lets people pay for purchases with a mobile phone number, purchased by eBay in July for $240 million (See chart for funding details). On the marketing side, Dotomi, a Chicago-based provider of Internet advertising and media management services, sold to ValueClick, a publicly traded online advertising company, for $295 million.

And of course, there were cloud deals. Citrix Systems announced in July that it had purchased cloud computing software and infrastructure provider Cloud.com for an undisclosed sum, although several media outlets reported at the time that the value was more than $200 million.

Japanese telco NTT popped its head in the cloud space, as well, through a subsidiary snapping up cloud computing software provider OpSource, a company in which it previously invested, for an undisclosed sum in July.

Health care and life sciences investors weren’t left out, either. One of the biggest deals announced between July and mid-August was Allergan’s purchase of Vicept Therapeutics, a developer of topical treatments for skin discoloration, for $75 million up front, plus up to $200 million in additional milestone-based payments. Another sizeable deal was Medtronic’s acquisition of PEAK Surgical, a developer of tools for performing surgical incisions with reduced bleeding, for $120 million, minus a $15 million prior investment.

Later stage, venture-backed companies were active acquirers as well, particularly in the social media space. Push Pop Press, a developer of iPad publishing tools, garnered headlines in August when Facebook announced it had purchased the company for an undisclosed sum. Daily deals site LivingSocial, meanwhile, expanded abroad with its purchase of South Korean discount deal site TicketMonster.

The M&A activity comes in the wake of a fairly active period for venture-backed acquisitions in the second quarter. A total of 79 venture-backed M&A deals were reported for the second quarter, 36 of which had an aggregate deal value of $5.4 billion, according to the National Venture Capital Association and Thomson Reuters (publisher of VCJ). The average disclosed deal value was $150.3 million, up 24% from Q1 2011. By total disclosed deal value, second quarter volume showed a 56% increase from the second quarter of 2010.

The information technology sector led the venture-backed M&A landscape in the second quarter with 56 deals and a disclosed total dollar value of $2.7 billion. Within this sector, Internet specific and computer software and services accounted for the bulk of the targets with 21 and 20 transactions, respectively.

Joanna Glasner can be reached at joanna.glasner@thomsonreuters and on Twitter at @jglasner.