M&A International Inc. Alternative Energy M&A - Western Reserve ...

6 Alternative Energy M&A
20%
% Share by Deal
Volume
Operational
Technology
80%
23%
% Share by Deal
Value
Operational
Technology
77%
Source: Copal Analysis, Capital IQ
* Based on top 50 deals by deal value for each year (2007–2009)
M&A Deal Makers
While utilities have accounted for the largest share of
deal value, deal volume is currently driven by pureplay
companies.
18%
Figure 6: Target analysis: operational vs.
technology companies
Figure 7: M&A deal volume by deal type
(percentage deal value share)*
16%
40%
Pure Play (12%)
Utility (47%)
Finance/PE (23%)
Other (18%)
26%
Source: Copal Analysis, Capital IQ
* Based on top 50 deals by deal value for each year (2007–2009)
Pure plays seeking economies of scale
Between 2007 and 2009, pure-play alternative
energy companies accounted for 40% of total deal
volume and 12% of total deal value. Most
acquisitions by pure-play companies occurred in the
US and Western Europe. Such transactions usually
involved participants acquiring smaller companies to
expand both their generation capacity and
geographical footprint. In addition, the target scope
for pure-play companies was substantially more
diversified, unlike utilities, which are more heavily
focused on acquiring wind energy companies. In
2009 in particular, pure-play companies
demonstrated a greater interest in acquiring
companies to diversify their energy mix and help
provide integrated energy services.
As a result, pure-play companies with operational
assets are acquiring technology companies or
manufacturers to secure a pan-sector end-to-end
renewable energy footprint, e.g. last year’s
acquisition by Pirelli Ambiente S.p.A., an alternative
fuel producer, of Solar Utility S.p.A., a solar PV
technology developer and operator, for $12mn.
Utilities increasing alternative energy
exposure
Between 2007 and 2009, utility companies
comprised 26% of total M&A volume and 47% of
total deal value. These transactions were driven by
utilities trying to increase their portfolio exposure to
renewables as well as attempting to acquire new
technology or manufacturers and developers of
alternative energy assets. For example, last year’s
acquisition by International Power plc, a UK-based
utility company of AIM PowerGen Corporation, a
developer and manufacturer of wind power
generation facilities in Canada, for $120mn,
highlighted this trend.
Wind assets have been the preferred acquisition
target of utility companies due to their lower
acquisition costs and the availability of production
tax credits in many regions. Over the next 10 years,
we believe that utility companies will continue to
account for a significant share of total M&A activity
due to requirements to satisfy Renewable Portfolio
Standards. Furthermore, as solar plants increase
their production scale and technological advances
lower costs, solar targets are likely to represent a
larger share of total M&A activity.
Private equity and institutional investors
diversify their portfolios
Private equity, venture capital and other institutional
investors have accounted for 18% of total deal
volume and 23% of overall deal value in the
alternative energy sector over the past three years.
The percentage share of private equity and
institutional investors in total deal value has fallen
sharply since 2007 although we expect a change as
institutional investors seek to increase their sector
exposure.
Private equity and financial investors were also
responsible for over 80% of private placements
during the same period. Between 2007 and 2009, a
total of 171 private placements were made by wind,
solar and biomass companies (Figure 8) with an
average deal value for private placements of around
$33.3mn.
June 2010
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