Talk to anyone on 'the street' and they will tell you it has been a tough year for the public markets in Canada. There have been very few IPOs, the majority of which have traded down, limited follow-on financings, and a steep decline in trading. That has made for more than a handful of migraines and an uptick in sales in bear market pubs.
So when I finished lunch the other day with a high profile tech VC and they said they expect 95% of their future exits to come from M&A I wondered aloud if we were witnessing a fundamental shift away from the public markets for small and mid-sized 'new economy' businesses? Were the public markets losing their sex appeal? Were the costs of running a public company starting to outweigh the perceived benefits?
I thought I would dig deeper, talk to CEOs of both private and public companies but also examine the data. It had to provide color as to whether or not a trend was developing to support my belief that more and more small and mid-sized companies were finding more value through M&A than IPO here in Canada. Below is a summary of my findings – more information can be found in the below presentation.
I was shocked at how little public activity there was within the 'new economy'. Despite the conventional thinking that IPOs are sexy, overwhelmingly the trend indicates that private stakeholders are turning to M&A to maximize their returns.