2016 average total return of IPOs was 23%, $15.2bn in tech M&A

why-so-serious

Investors are betting 2017 will be better. Renaissance Capital pointed out that the average total return of I.P.O.s in 2016 reached 23 percent, a sharp reversal from the negative 2.1 percent return of 2015 offerings and surpassing the 21 percent return of two years ago.

So says a startup IPO wrap-up from Meanwhile, in the enterprise tech space, Brenon over at 451 reviews 2016:

The number of enterprise-focused companies that have set sail to Wall Street this year is once again mired in the single digits. That’s a disappointment given the abundant IPO-ready tech vendors and a bullish investor base that has pushed the broader US equity market to record levels in 2016.

By our count, just eight enterprise tech firms have made it public on the two major US exchanges so far this year, matching the total from 2015.

Those companies:

Company Date of offering
SecureWorks April 22, 2016
Twilio June 23, 2016
Talend July 29, 2016
Apptio September 23, 2016
Nutanix September 30, 2016
Everbridge October 10, 2016
BlackLine Systems October 28, 2016
Quantenna Communications October 28, 2016

But, the reason isn’t a lack of exits, there’s been much M&A in tech this past year, as Scott says:

Total M&A spending on infrastructure management jumped 57% to $15.2bn, with the volume of transactions rising to 152 from 146 as we near the end of 2016.

There are some big chunks in there – like the weirdly structured HP/MicroFocus deal for HP’s Software and cloud software groups which was $8.8bn, but left HP owning 51% of the combined company…so whatever you call that kind of deal.

It’s be even more helpful to see what the profits/returns on these deal were. Brenon has this on those eight tech IPOs:

The valuation of these acquisitions underscores the fact that December dealmaking has featured more ‘value’ than ‘growth’ strategies. All five of this month’s biggest deals have gone off at less than 4.4 times trailing sales, which is the average multiple for the 50 largest transactions announced overall in 2016, according to the M&A KnowledgeBase. On average, buyers in December have paid 3.3x trailing sales, a full turn lower than they did in the previous months of the year.

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