For private company M&A the multiple stayed below 5x after a company had raised more than EUR 45M (https://bit.ly/36dPAVy).
We have now added 12 European M&As completed after an IPO. The figure below shows the “Grand return multiple”, i.e. our calculation of all cash received divided by all cash invested, based on information publicly available and the probability of receiving disclosed contingent payments.
The figure indicates that the additional cash raised by IPO and PIPEs may allow you to achieve a better multiple in an M&A, however, the observation comes with precautions. We have assumed that original investors did not sell shares before the M&A! Also, 12 datapoints are not a lot – and we have not yet normalized the observation against all IPOs of European therapeutic companies to understand if there may be a higher risk associated with doing an IPO relative to e.g., a series C!
Maybe an IPO creates more financial independence and thereby higher M&A multiples. Also, it is not possible to do a structured M&A (with flimsy bio-dollars) of a public company. They are all up-front cash transactions – and that may also allow for a better actual multiple!