This year’s IPO market weakest since 1977, and M&As are in the gutter

Even before this week’s massive financial turmoil, the environment for taking companies public or selling them was bleak. And this week’s massive plunge in the Dow will only serve to rattle nerves even more — so don’t expect much improvement for the rest of the year.

There were no IPOs in the second quarter, and just one in the third. So far, this year is the weakest for IPOs since 1977.

This year’s fourth quarter is unlikely to be much better. Thirty-eight venture-backed companies are currently filed for an initial public offering with the SEC, but that’s fewer than the 42 in the second quarter. In other words, the companies wanting to go public are just not getting out, and it’s unclear when they’ll be able to.

As for company acquisitions — which is the other way entrepreneurs and venture capitalists can make money — there were only 58 transactions in the third quarter, according to a poll by Thomson Reuters and the National Venture Capital Association (NVCA). As you can see by looking at the chart, that’s very low by historical standards.

The lower acquisition tally stems from the fact that many large companies have become uneasy about their future.

And if the financial turmoil continues, venture capitalists will make fewer investments, because they’ll be spending more time with their existing companies to make sure they can be prepared for a sale or eventual IPO.

The only IPO this quarter was Rackspace, valued at $187.5 million, but that company’s stock has dropped off sharply.

Two companies that received US venture financing went public on foreign exchanges in the third quarter.