It looks like M&A levels in the first quarter of 2008 will be comparable to those seen in the first two quarters of 2007. This indicates that, although global economic conditions are extremely unsettled and public market exit opportunities have all but dried up, European venture capitalists can still find exits for their investments.

But are recent European trade sales providing good returns for investors?

Calculating an approximate ‘exit multiple’ ratio confirms that the average trade sale exit return remained steady in 2007 at around 14 times the total investment received. The ratio is calculated by dividing the total disclosed exit value by the total amount of disclosed venture funding into a company prior to exit.

Have European entrepreneurs changed their exit strategies in response to current market conditions?

The lack of public exit opportunities in Europe, covered in a previous Essential Intelligence Weekly newsletter (‘Still waiting for the first European venture backed IPO of the year...’ – 19/02/2008), has led companies to postpone IPOs and in some cases, change their exit strategies to favour trade sales. For example, Swedish open-source database developer, MySQL originally planned to IPO in 2007 but ended up announcing a €675m acquisition by Sun Microsystems in Q1 2008.

Comparing companies that have informed Library House of their exit strategy in the last three years reveals that the percentage of European entrepreneurs favouring an IPO as the most likely exit route has remained steady at around 38% even as market conditions have worsened. This indicates that either European entrepreneurs may not fully understand the current economic problems or they believe that public market conditions will pick up by the time it comes for their company to exit.

Who are some of the companies that have informed Library House this year that they intend to publicly exit in the future?

Israeli stealth mode fuel cell start-up, CellEra raised €1.4m from Israel Cleantech Ventures in Q4 2007. The company is developing “truly affordable and reliable” fuel cell systems that it hopes will allow full-scale commercialisation of fuel cell technology. Following the funding round, chief executive and co-founder Ziv Gottesfeld spoke to Library House regarding future exit plans. Gottesfeld informed Library House that although no firm timescale had been defined yet, CellEra would look to exit through an IPO in the future.

Yann Motte, chief executive and co-founder of London-based Webjam told Library House in January 2008 that his company would prefer to exit publicly but that a trade sale to a large online company or publishing group has not been ruled out. Webjam has developed a 'next-generation' social networking platform allowing individuals and organisations to easily combine a number of web 2.0 features to create and manage an online presence. The company is currently looking for a second round of funding of around €5m-8m to finance technological development, marketing and international expansion.

Collanos Software is a Swiss company that develops business collaboration software. The core software, ‘Workplace’, is free to download – the company plans to monetise its product by selling premium services to users seeking extra functionality. The company raised an initial €2.7m round of funding from Andreas Danuser, Reto Hartinger, Ecosystem Ventures and Zurcher Kantonalbank in Q4 2007 and is currently looking to close a further €3m this year. Chief executive Peter Helfenstein told Library House in February 2008 that the company planned to become "highly profitable" by 2009 and then prepare for an IPO. However, Helfenstein did acknowledge that if the company did attract a strong enough active user base in the coming years, it would also be an attractive target for an acquisition.

It is encouraging to see that many entrepreneurs declaring a preference for an IPO also recognise and welcome the possibility of a trade sale, suggesting that European entrepreneurs aiming for a public exit do realise that a private trade sale is probably the most likely successful outcome for their company. As global economic conditions play out over the coming years, it will be interesting to see how many companies currently aiming to IPO actually alter their plans and end up exiting via a trade sale instead.

PanGenetics, the UK and Netherlands-based therapeutic antibody company, has raised €23m in series C funding from Edmond de Rothschild Investment Partners (EdRIP), Biogen Idec New Ventures, Fortis Private Equity, Index Ventures, Forbion Capital Partners and Credit Agricole Private Equity, representing one of the largest private rounds in the Dutch biotech industry to date. PanGentics specialises in the clinical application of monoclonal antibodies for the treatment of immune mediated diseases, cancer and pain, and the funding will be used for the clinical progression of its PG102 and PG110 antibody programmes, as well as advancing earlier stage programmes.

TxCell, the France-based specialty biopharmaceutical company, has raised €10.5m in second round funding from Auriga Partners, AXA Private Equity, Bioam Gestion, CDC Innovation and Seventure. TxCell specialises in anti-inflammatory immunotherapy, developing therapies against debilitating illness such as Crohn's disease, multiple sclerosis, psoriasis, asthma or rheumatoid polyarthritis, caused by deregulation of the immune system, by targeting and acting on Tr1 lymphocyte cells. The funding will enable the company to determine the clinical efficacy of its treatment.

ORECon, the UK-based wave energy company, has raised £12m (15.7m) from from Advent Venture Partners, Wellington Partners, Venrock and Northzone. ORECon has developed an improvement to oscillating water column energy generation, its MRC (multi-resonant chambers) technology, which uses wave chambers of differing draughts to increase efficiency. The company will use the funding to build and deploy a full-scale device, followed by the commercial roll-out of its technology.

More companies' intelligence at www.libraryhouse.net

Bluescope Medical Technologies, the UK-based developer of cardio-pulmonary acoustic monitoring systems, has been acquired by US and UK-based Axellis. Axellis, stating its intent to become a leading, global provider of specialist software and hardware to optimise treatments in oncology and cardiology, announced the Bluescope deal alongside two other acquisitions: Innocure, a US-based developer of oncology software tools; and Mailling Wright Products, a UK-based company using technology for patient data capture and analysis of the remote design and manufacture of radiotherapy appliances and immobilisation devices. Bluescope’s founders, Dr Peter Donnelly and Andy O’Hara, and other key staff, have joined Axellis as part of the deal.

Kimotion Technologies, the Belgium-based developer of software for the modeling, verification and optimisation of analogue and mixed-signal chips, has been acquired by Belgium-based Magwel, with the entire Kimotion engineering team joining its acquirer. Magwel will integrate Kimotion’s optimisation technology with its 3D simulation tools in order to provide a robust design and verification toolset for new generation technologies. Concurrent to the announcement, Magwel also revealed that it had closed a series A funding round from Innovacom and Quest for Growth

More companies' intelligence at www.libraryhouse.net

Valimo Wireless, the Finland-based mobile identity software company, has appointed Matti Rusi as chief executive. Prior to joining Valimo, Mr Rusi was senior vice president for global marketing, product marketing and North American operation at Basware, and before this he was head of Basware’s global operations and a country manager in Finland, Benelux and the US. Former chief executive, Tapio Vailahti, remains with the company as executive vice president.

ReVolt Technology, the Switzerland-based battery company, has appointed James P. McDougall as chief executive. Over the last 20 years Mr McDougall has held senior management positions in the battery and printed electronics industries at such companies as International Components Corporation, Valence Technology, and most recently Solicore, where he was executive vice president of sales and business development. Mr McDougall replaces Dieter Woschitz, who had been acting as temporary chief executive.

PharmaKodex, the UK-based speciality pharmaceutical company, has appointed Keith Churchman as chief financial officer. Mr Churchman was previously finance director, company secretary and board member of DanioLabs, and was significantly involved in its acquisition by UK-based Summit. He has formerly been the chief financial officer at Cambridge Biotechnology and managing director of Bridgepoint Capital.

More companies' intelligence at www.libraryhouse.net

Omnia Molecular, the Spain-based developer of a new method for the discovery of active molecules to be used in antibiotics, antifungals, and anti-parasitic drugs, has informed Library House that it will be looking for at least €3m in funding in about 18 months' time in order to hire marketing staff and a commercial executive, prior to the scheduled launch of its products in late 2009. Lluis Ribas (founder and chief executive) stated that the company plans to exit through an IPO in around three years' time, by which point the pharmaceutical side of the business would look to have a lead molecule ready for trials.

PrecisionPoint Software, the UK-based data warehouse software company, has informed Library House that it is currently seeking up to £2m (€2.7m), in order to fund international expansion and to implement its channel strategy, with the company likely to use the funding to hire marketers and partnership managers. Dr Nigel Geary (chief executive and founder) stated that the company plans to exit through a trade sale, aiming to be acquired by either Microsoft, SAP, Infor, Cognos (IBM) or another company specialising in enterprise software. Dr Geary hopes to grow the company's client base from its current 40 to about 500 before seeking an exit, although he stated that the company is open to discussions at any time.

More companies' intelligence at www.libraryhouse.net