Venture Capital: Prominence of IPOs and Trade Sale Exits – March 2015

by Philipp Kuny

  • 27 Mar 2015
  • PE
  • VC

IPOs & follow-ons and trade sales accounted for 91% of the number of exits and 96% of the aggregate value of venture capital exits in 2014. While IPOs have long been a key exit route for fund managers, Preqin’s Venture Deals Analyst shows that trade sales are a far more common way for investors to exit stakes in a company.

In the years following the financial crisis, IPO exits appeared to become a less valuable exit strategy, as shown in the chart below. However, from 2009 to 2010 the number of IPOs & follow-ons more than doubled and remained around this level until 2014, when a further increase led to a record-breaking number of IPOs and follow-on offerings (226), with an aggregate value of $48bn, up from 166 IPOs and follow-ons valued at $17bn in 2013.

Despite the large increase in the number of IPOs in 2014, trade sales remain the most prominent exit strategy for venture capital deals, with 744 exits announced last year. This represents a significant rise from the 669 trade sales announced in 2013 and continues a general upward trend in the number of these exits since 2007, when 477 divestments were announced. The aggregate value of trade sales also increased from $22bn in 2008 to $70bn in 2014. The average value of both IPOs & follow-ons and trade sales also peaked in 2014, at $228mn and $296mn respectively.

2014 represented the strongest year for IPOs and trade sales in terms of number of exits, as well as aggregate value, although it remains to be seen whether 2015 will continue this momentum. Q1 2015 YTD shows slightly lower figures than last quarter, with 36 IPOs & follow-ons and 174 trade sale exits accounting for an aggregate exit value of $2.7bn and $13bn respectively. However, Preqin’s Venture Deals Analyst reveals a strong IPO pipeline with 214 expected IPOs and follow-ons for  an aggregate value of $6.3bn, suggesting an imminent flow of public market exits for venture capital-backed companies.

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