Data Focus

PE-VC exit deals rebound in Q3 2020

Annapurani V Chennai | Updated on November 17, 2020 Published on November 17, 2020

PE-VC exits in Q3 2020 rose to 40, the same as in Q1 2020; in Q2, it had dropped to 17, the lowest in last 20 quarters

 

The number of PE-VC exits in Q3 of 2020 rose to 40, the same as in Q1 2020. In Q2, the number of PE-VC exit deals dropped to 17, the lowest in the last 20 quarters.

The number of VC exits also jumped back to 16 deals in Q3 from nine in Q2, but did not quite reach Q1 levels of 23 deals.

The amount involved in the exit deals in Q3, however, was lower than in Q1, the data showed.

Also read: With Covid-19, PE investments in key healthcare segments at a feverish pitch

For instance, for PE-VC exits, the amount in Q1 was $2,532 million, while in Q3, it dropped 38.5 per cent to $1,558 million. Likewise, for VC exits, the amount was $299 million in Q3, a 33.7 per cent drop from Q1’s $451 million. And on a year-on-year basis, the dip was even higher. In Q3 2019, PE-VC exits amounted to $3,762 million through 49 deals, and VC exits stood at $1,918 million via 22 deals.

“Generally, PE/VCs hold on to their investments during an economic crisis or downturn due to decrease in valuations, which was witnessed in Q2 when the impact of the Covid-19 pandemic was at its peak, following a nationwide lockdown. However, by the advent of the third quarter, economic activity showed recovery and certain sectors and segments remained unaffected. Sentiments were buoyed by reports of various governments claiming to bring vaccines by the end of this year. Sectors like telecom, healthcare, fintech, and online gaming witnessed massive traction in the early second half of 2020 due a rise in the digital economy that led to increased deal activity, which also resulted in some exit deals,” said Apoorva Ranjan Sharma, Co-founder & President, Venture Catalysts, an incubator for start-ups.

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

Also read: Private equity investments hit record high of $28.66 billion in 2020

VC exit deals are normally a subset of the PE-VC exit deals. They also include the same aspects as the PE-VC deals, but only for exiting investors with respect to VC investments. VC exit deals typically constitute Seed to Series D investments in firms that are less than 10 years old and the amount is capped at $20 million.

“In the investment business, timing an exit is not always easy. Timing becomes even more unpredictable in times of a pandemic,” said Pankaj Raina, Managing Director, Research and Investments, Zephyr Peacock India, adding, “Since there was an opportunity as investment activity began to resume, investors who were nearing their fund life cycle, wanting to improve distributions, exited.”

“I expect investment activity to pick up in the next few quarters. Most of us, including the entrepreneur universe, have now accepted the new normal. We will continue to find innovative ways to support deal-making activities,” Raina said.

 

PE-VC exits

VC exits

Quarter

No. of Deals

Amount ($ mn)

No. of Deals

Amount ($ mn)

Q3 2020

40

1,558

16

299

Q2 2020

17

376

9

34

Q1 2020

40

2,532

23

451

Source: Venture Intelligence, Data as of November 2

 

 

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Published on November 17, 2020
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