In an earlier post I wrote about the importance of keeping in mind at what values tech company exits happen when thinking about how much capital to use to build a business. I used a graph to show how few transactions above $80m-100m actually happen in Europe, to highlight the fact that using more than $15-20m to build a software business (for example) dramatically reduces the likelihood of an acceptable return.
So let's look at the top European M&A exits of 2006 to see if this theory holds at the top end. By my count there were 8 acquisitions of tech companies above $100m. Of these 5 were venture-backed and 3 had not raised professional external capital. Perhaps this means that venture investors do in fact add value (or that they are attracted to valuable companies...). You can see the Top 10 exits in the chart below (the ones in bold were venture-backed).
But in all of 2006 there were probably more than 80 exits known to be above $20m, so in fact only 10% break the $100m barrier. Considering the usual challenges that European companies face as they expand internationally, this is in fact not a bad statistic. All it means is that for investors that have put less than $20m to work, the probability of a 3x or 5x return is significantly higher than for those that have put $30-40m into a company -- self-evident you might say, although it's surprising how many investors are still pushing funding round sizes higher and higher.
The other deal of note in 2006 is the acquisition by TA Associates of eDreams from incumbent investors Apax, Atlas, 3i and others. This is rare in the tech market, but expect to see more of these secondary buyouts in Europe as larger private equity funds look for deals in the sector. We also had HgCapital's huge leveraged buy-out ($675m) of Norwegian software vendor Visma (not included here because it's public).
Interestingly, 2005 saw about the same number of $100m+ exits (including Skype), so let's hope that in 2007 we can nudge that number up to, say, 10?