Insights into Value Creation and Exit Trends for Technology Companies

This Edition's Question
When are software companies exiting from an age perspective?

We looked at software company exits (M&A/IPO) for the trailing 5 years (July 2014 - June 2019) 

in Oregon and Washington to get the answer and we compared to the rest of the United States.

The Quick Answer

The most common age for an exit is year 4.

Half of all companies that exited did so before year 10.

98% exited via M&A transactions.

The Longer Answer

CVA Research on Age - Number of Exits by
CVA Research on Age - Number of Exits by
CVA Research on Age - Age at Exit by Yea
CVA Research on Age - Age at Exit by Yea

Average Age at Exit:  13
Median Age at Exit:  10
Most Common Age at Exit:  4

Insights From The Data

Although the most common age for exits over this time frame is four, in the past twelve months the prevalent age shifted to six.  Half of all exits are happening before the age of ten which has been consistent over time.  

The volume of software company exits in the northwest has increased dramatically over the past five years and doubled between 2015 and 2018.  The average age at time of exit, however, has remained fairly consistent with 98% of the transactions being done through M&A.  The charts below show further details.

We compared these results to the rest of the United States and found that the overall trends are consistent with a few exceptions.  The average age of companies at IPO through the US is gradually going down while that of the northwest companies has gone up.  In addition, the percentage increase in exits in the northwest is increasing at a steeper rate than the country as a whole.  

Insights From Intermediaries

M&A Advisors and Bankers that were interviewed state that many of their customers were not planning for their exits and they moved into the process with little advance notice.  This, in turn, had an impact on the ability to achieve desired exit valuations in some (not all) cases.  They suggest stage specific strategies be woven into the overall company plan to improve results.  

Additional Data on Exit Volume and Age

CVA Research on Age - Number of Exits by
CVA Research on Age - Number of Exits by

The average age for companies exiting via M&A has been fairly steady over the past five years.  IPO Average Ages has trended downward across the US while it has gone up steeply in the northwest.

Data Source:  Crunchbase + interviews with intermediaries and CEO's