Venture-backed M&A activity shows encouraging signs

In the third quarter, venture-backed M&A activity remained soft, with 107 deals reported, compared to 125 for the same period a year ago. Likewise, the first three quarters of 2013 saw just 286 VC-backed deals with disclosed valuations, well off the 362 transactions for the same period in 2012.

But don’t tell that to Norwest Venture Partners, Sequoia Capital, Intel Capital and other firms, which have succeeded in getting a number of exits under their belts the last several months, according to data from Thomson Reuters (publisher of VCJ).

For example, over the last 12 months, Sequoia has seen 11 of its portfolio companies exit, including Tumblr (bought by Yahoo for $1.1 billion) and Virident Systems (bought by HGST for $685 million). Similarly, the data showed that Intel Capital was an investor in two dozen companies that have been acquired in the previous 12 months, including Avago Technologies’ purchase of CyOptics in April for $400 million.

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Source: Photo courtesy of Norwest Venture Partners

Jeff Crowe

“The exit activities are from around the world and reflect our global investment strategy.”

Jeff Crowe

Managing Partner

Norwest Venture Partners

Likewise, Norwest is enjoying a number of sizable liquidity events recently. In all, Jeff Crowe, managing partner of Norwest, said that the firm has seen seven exits in 2013 with a combined market cap of $7.5 billion. (Update: make that eight exits with the $525 million sale in late October of Virtela Technology Services to NTT Communications Corp. See press release here.)

Norwest exits include the three IPOs of FireEye, RetailMeNot and Cyan, and four other acquisitions, including the sale of 41st Parameter to Experian for $324 million in early October.

The other Norwest portfolio companies to sell this year were ScaleIO (acquired by EMC), Passif Semiconductor (bought by Apple) and Shriram City Union Finance, which was partly sold to TPG in India.

The eight NVP portfolio companies that achieved exit success in 2013 have resulted in a combined transaction value of more than $8 billion, according to the firm.

“The exit activities are from around the world and reflect our global investment strategy,” said Crowe, who focuses on consumer Internet deals.

The mix of deals also reflects Norwest’s multi-stage approach. ScaleIO and 41st (as well as FireEye and Cyan) were early-stage deals from Fund IX, which initially closed in 2001. The firm is currently investing from a $1.2 billion Fund XI, vintage 2009.

As for the outlook, Crowe said he is positive that the firm will continue to see a number of exits in 2014, as the portfolio companies continue to scale and look to either hold an IPO or seek out an M&A deal. After all, the Palo Alto, Calif.-based firm is an investor in a number of hot companies, Lending Club, Mobile Iron and Adaptive Planning, among others.

Crowe, who sits on the board of Lending Club, a lender of unsecured consumer loans, said the company is poised to have a good exit. Crowe also said there are a number of companies within the Norwest portfolio that “the firm is excited about,” but he declined to say which ones, if any, have confidentially filed for an initial public offering.