1. Contacts:
Emily Mendell, The Weiser Group for NVCA, 610-359-9609, emendell@weisergroup.com
Josh Radler, Thomson Venture Economics, 973-353-7139, Joshua.radler@tfn.com
Venture-Backed Merger and Acquisition Activity Remained Steady Amidst Lower
Valuations in 2002
February 18, 2003 Newark, New Jersey -- The average value of venture-backed mergers
and acquisitions completed in 2002 fell dramatically from the previous year, according to
Thomson Venture Economics and the National Venture Capital Association. For the year,
300 transactions closed with a value of $7.2 billion compared with 2001 when the sale of
336 companies returned $17.1 billion. This significant drop in average deal size reflects
a large number of low valuation sales, which brought down the more successful value
realizations from portfolio companies during the year. Amid this backdrop of general
decline, the year was marked by a strong degree of stability; with no large swings in
activity or value from quarter to quarter as was seen in both of the two previous years.
Venture-Backed M&A Activity by
Venture-Backed M&A Activity
Region, 2002
By Quarter, 2000-2002
Regions Deals Value ($M)
Quarter DealsValue($M)
California 117 1,834.80
2000-1 93 23,809.36
New England 38 1,202.51
2000-2 91 26,380.42
Southeast 30 993.43
2000-3 70 7,894.79
Greater New York 24 957.42
2000-4 54 9,871.65
Mid-Atlantic 19 610.84
2000 Total 308 67,956.21
Southwest 14 505.18
2001-1 70 8,046.00
Northwest 6 368.21
2001-2 93 3,382.49
Ohio Valley 14 258.29
2001-3 88 3,721.32
Rocky Mountains 14 165.05
2001-4 85 1,938.34
Mid-West 8 145.18
2001 Total 336 17,088.15
South 8 80.10
2002-1 67 1,629.20
Great Plains 8 43.17
2002-2 78 1,958.53
Thomson Venture Economics/
2002-3 73 1,970.39
National Venture Capital Association
2002-4 82 1,606.06
2002 Total 300 7,164.18
Thomson Venture Economics/
National Venture Capital Association
In the fourth quarter of 2002, acquirers paid $1.6 billion for 82 venture-backed
companies. While the total transaction value declined by more than $300 million from the
third quarter, the number of deals rose slightly from 73. This was the highest number of

2. deals completed in a single quarter since the fourth quarter of 2001, when 85 deals were
valued at $1.9 billion.
quot;Having a strong exit market is essential to a healthy venture capital investment flow and
we were challenged in 2002,quot; said John S. Taylor, Vice President of Research at the
NVCA. quot;Looking ahead, it’s likely that completing an IPO will continue to be difficult in
this environment. Therefore, venture capitalists are looking at M&A as a key part of their
exit strategies. quot;
Continuing as the leading sector, Software dominated the venture-backed M&A
landscape in terms of both number of deals and total value. This sector accounted for
43% of the deals and 40% of the value for the quarter, with 36 transactions valued at
$655.5 million. Four of the top ten deals for the quarter were software related including
the sale of PentaSafe to NetIQ for $250 million in December and the eRoom Technology
acquisition by Documentum for $167.7 million.
One of the more interesting developments was the surge in activity among healthcare-
related companies in the Medical Devices/Equipment and Healthcare Services sectors.
Not traditionally a major factor in the venture-backed M&A realm, these two sectors
combined to account for more than 25% of the value for the quarter. Three healthcare
services companies were sold for $105 million, and three Medical Devices/Equipment
deals garnered $315.2 million. The Medical Devices sector had the largest deal of the
quarter. Medtronics purchased Spinal Dynamics, a developer of spinal replacement discs,
in October for $269.5 million. Additionally, American Medical Systems acquired
cryosurgical technology developer CryoGen for $40 million.
Another sector, Telecommunications, made a relatively strong showing with 7 deals
valued at $172.9 million. On the contrary, IT Services had its slowest quarter of the year
with six companies accounting for $6.2 million in transaction value. However, over the
course of the year this sector was one of the strongest with 31 deals worth $541.9 million.
The year also saw two significant changes in the distribution of deals geographically.
California retained its pre-eminence among the regions in the total number of deals
closed with 117. However, its share of the total value dropped significantly from $8.6
billion in 2001 to $1.8 billion in 2002. This drop made the re-emergence of the
Southeastern and Middle-Atlantic regions more dramatic after a weaker showing 2001.
The middle-states of Delaware, Virginia, Maryland, and the District of Columbia
rebounded from $133 million in 2001 to $610 million in 2002; Florida, Georgia, South
Carolina, and North Carolina witnessed an equally impressive burst of activity with 30
deals valued at $993 million, up from $389 million the previous year. The New England
region maintained its second ranking behind California with $1.2 billion spread over 38
transactions for the year.
The National Venture Capital Association (NVCA) represents over 450 venture capital
and private equity organizations. NVCA's mission is to foster the understanding of the
importance of venture capital to the vitality of the U.S. and global economies, to

3. stimulate the flow of equity capital to emerging growth companies by representing the
public policy interests of the venture capital and private equity communities at all levels
of government, to maintain high professional standards, facilitate networking
opportunities and to provide research data and professional development for its members.
For more information visit www.nvca.org.
Thomson Venture Economics, a Thomson Financial company, is the foremost
information provider for equity professionals worldwide. Venture Economics offers an
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research reports, and the Venture Expert™ database. For over 35 years, Venture
Economics has been tracking the venture capital and buyouts industry. Since 1961, it has
been a recognized source for comprehensive analysis of investment activity and
performance of the private equity industry. Venture Economics maintains a long-standing
relationship within the private equity investment community, in-depth industry
knowledge, and proprietary research techniques. Private equity managers and
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standard. For more information about Venture Economics, please visit
www.ventureeconomics.com.
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shares are listed on the New York and Toronto stock exchanges (NYSE: TOC; TSX:
TOC).
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