IPO market sags as M & A hits 5-year high.

• Author: Marshall, Jeffrey
• Position: Mergers and acquisitions, initial public offering

Maybe there's really something to the notion that Sarbanes-Oxley compliance fears have dissuaded private companies from pursuing a public offering and electing either to stay private or sell out to another company.

Only 10 venture-backed companies came to market in the year's first quarter, raising $540.8 million through initial public offerings (IPOs), according to Thomson Venture Economics and the National Venture Capital Association. While the first quarter is typically the lowest of the year for IPOs, offer amounts were also down considerably from last year. The first quarter's average offer amount of $54.1 million was the lowest since the third quarter of 2002, when the average offer was $30.0 million.

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Conversely, the venture-backed M & A market continued to surge, with 95 companies being acquired with a disclosed value of $4.8 billion, the highest total disclosed value in five years.

Mark Heesen, president of the National Venture Capital Association, expressed unease about the poor IPO activity: "We are becoming increasingly concerned about the economic implications of the lackluster IPO market for venture-backed companies," he said. "Although we are bolstered by the continued strength of the acquisitions market, we can not rely on it as the only avenue to produce above-average returns for the venture industry. Our economy depends on a strong U.S. capital markets system to create jobs and revenues here."

Heesen added: "This situation needs...