PE-VC exit deals hit 23-month high in Feb

Private Equity-Venture Capital (PE-VC) exits in Indian companies surged to 22 deals in February, due to increasing acquisitions in the start-up ecosystem, backlogs of 2020 getting cleared out and the stock markets performing well resulting in more stake sales.

This is the highest number of PE-VC exits since March 2019, according to data from Venture Intelligence, a firm that tracks private companies’ investments, financials and valuations.

Pent-up demand

Sandeep Mishra, Vice-President, Research and Investments, Zephyr Peacock India, said the surge in the number of exit deals is due to pent-up demand from last year being filled up and also because of markets recovering fast post the Covid shake-up. He added that the exit ecosystem is also maturing with increasing mergers and acquisitions in the start-up ecosystem and the consolidation play in technology sectors.

PE-VC exits dropped heavily last year — they slumped to five deals in April, and in May, they fell further to four deals, the lowest in the last 26 months. But they jumped back to 18 deals in September, stood at 20 deals in November 2020 and climbed to 22 in February this year.

In 2020, stock markets were very depressed and not many investors were ready to invest; but towards the end of the year, stock markets surged and that allowed many large companies to go public, said Vinay Bansal, Founder and CEO, Inflection Point Ventures, adding, “Also, a lot of the larger investors reopened their cheque books. Sentiment for 2021 has been quite good and I think that’s what has led to some companies going public and others taking up the next round of large investments. And more investors are now willing to give exits to earlier VCs.”

Increase in value

The amount involved in the deals also took a hit in 2020. For instance, it fell to as low as $106 million in April and stayed in the $100-180 million range from April to July. However, it bounced back to pre-Covid levels with $1109 million in September.

And in February, according to data from Venture Intelligence, the cumulative value of the 22 exit deals climbed to $1,423 million, the highest since November 2019.

Exits usually take place to provide founders, employees and early investors an opportunity to get some liquidity. PE-VC exit deals typically include exits via mergers and acquisitions, and open market transactions. Open market transactions normally include PE-VC backed initial public offerings (IPOs) and public market sales, whereas mergers and acquisitions constitute deals such as strategic sales, buybacks and secondary sale purchases.

More exits expected

Experts said the upswing in exits will continue for the next few months as founders are now looking to raise funds, especially those who couldn’t raise last year, and many companies would also begin to go public.

“There are reports of big conglomerates such as Reliance and Tata Group acquiring high value start-ups in the consumer tech space, especially grocery and hyperlocal delivery which is likely to heat up the market,” Anuj Golecha, Co-founder, Venture Catalysts, said adding, “Besides, with many large unicorns like Udaan, Zomato, etc. considering an IPO, we expect some big ticket exits in the coming few months.”

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