VC-Backed IPOs Plummet 64% in Q3 while M&A Jumps 58%

As expected, third quarter VC-backed IPO results were dismal.

Only five VC-backed companies went public in third quarter, raising $442.9 million. This is down roughly 64% from the same time period in 2010 when 14 IPOs raised $1.2 billion, according to data from Thomson Reuters and the National Venture Capital Association.

In fact, Q3’s results are the worst time period for VC-backed offerings since Q4 of 2009, when four IPOs totaled $349.3 million. Four of the IPOs–Tudou.com, Zillow, Tangoe, and Carbonite– were in the IT sector, Thomson Reuters and the NVCA said. Horizon Pharma, which raised $49.5 million in July, was the sole non-IT offering.

The largest IPO came from Todou, the Chinese online video web operator, which raised $174 million in August, Thomson Reuters and the NVCA said.

In a surprise, VC-backed M&A wasn’t bad. There were 101 VC-backed M&A deals, totaling $6.3 billion. This compares to 113 VC-backed deals valued at $4 billion for the same time period in 2010. The number of deals dropped nearly 12% in third quarter of this year while deal value actually increased about 58%. In fact, Q3’s VC-backed M&A results were the best since fourth quarter of 2009 when 74 deals totaled $8.6 billion.

More than two-thirds, or 86, of the 101 M&A deals were in the IT sector. The 86 transactions represented $3.66 billion in deal value.

“While the IPO market screeched to a halt in the second half of the 3rd quarter, the acquisitions market continued to move forward,” said Mark Heesen, the NVCA’s president, in a statement.

Heesen warned that current economic instability could cut M&A and keep new IPOs at a “seriously low level” for the rest of 2011.