Sunstone has previously investigated the return multiples of venture capital funded companies HQ’ed in Europe () and concluded that when the total invested amount exceeds EUR 50M, the return multiple tends to stay below 5 in M&A transactions.
You asked us how this compares to the US. We did not know then – but we do now. In the figure below we have plotted the multiples of venture capital funded, US HQ’ed, EUR >50M M&A relative to total invested – and we have made two interesting observations relative to Europe:
– US companies in general achieve higher multiples (average of 21.6x vs 11.9x)
– US companies maintain a higher multiple relative to total raised (ceiling of EUR 100M vs EUR 50M)
Does the efficient capital market and strong life science venture capital ecosystem in the US facilitate biotech optionality? – and thus better M&A multiples? Is that the price Europe is paying for not having efficient stock exchanges and too few life science venture capital firms?
Alternatively, are the lower multiples a result of a smaller European market for the pharmaceutical industry and thus illustrate the financial discipline and care it takes to invest venture capital in Europe?
What do you think?