October Private Placements knocked the ball out of the park ($289M) with several major investments in Telecom and Biotech. Meanwhile, both M&A and the struggling local market for Public Offerings fell off the table.
Private Placements: October was dominated by several gigantic placements that blur the line between buyout and venture investment—a trend we all have observed for much of this decade as the asset class of “private equity” seeks to find a winning strategy. Biotech again had a busy month in October representing 21% of the total 28 deals and a whopping 60% of all funds raised. The giant deal of the month was United BioSource of Bethesda, which Berkshire Partners of Boston joined in supporting to the tune of an astounding $125M. When you add GlycoMimetics’ $38M raised to the total, then Biotech dwarfs all other sectors for October. With a $60M investment by TA Associates in TEOCO of Fairfax, Telecom Software & Services added its own mega-sized investment. The remaining 25 placements were spread across a broad array of regional staple industries including Healthcare Equipment, Energy, Internet Apps, Mobility and Security. In terms of distribution, Virginia and Maryland were about even with 12 and 14 deals, respectively. Obviously, the large Biotech deals tilted the volume of money raised toward Maryland. DC had 2 small transactions this month with none registering for West Virginia.
M&A: Unlike Private Placements, which held steady from September to October, the number of M&A transactions dropped precipitously in the region from 15 above $1M in value to only 8. Volume took an even bigger hit, dropping over 80% from $1.2B to a paltry $231M. The reason is the lack of any blockbuster M&A transactions such as SkyTerra and Iridium from the previous month. The largest transaction of the month by a factor of 2 was the sale of IXI Corporation to a bone fide strategic buyer, publicly held Equifax for $124M. Government M&A was well represented with 3 of the 8 deals over $1M in value, including the $51M sale of Phoenix Consulting to DynCorp. Two small banks were sold for approximately $10M each, reflecting the urgency of consolidation and survival in that industry. Security and Commercial IT Services each had two small transactions. Virginia sales dominated the field with 87% of the volume and 70% of the total number of deals.
Public Offerings: After a reasonably active September for local public market activity, October fell back into the doldrums. There were only two public market offerings for a total of $222M. The first was a pure secondary offering (selling shareholders versus new money for the company) by FBR Capital Markets Corporation (NasdaqGS: FBCM) where a related party Arlington Asset Investment Corp. sold out its total position in FBR representing 23% of the company. The second was a follow-on offering (new money into the company) of $133M by a REIT (Real Estate Investment Trust) named American Capital Agency Corp (NASDAQ:AGNC). AGNC was formed to purchase specialized instruments called “single-family residential pass-through certificates,” and this offering is a step-up funding of the company to purchase more. One selling shareholder of an investment bank and one refunding of a REIT—nothing really to crow about in the regional public markets.
