2021 was a monumental year for the sustainability-focused capital markets. Almost every type of financing vehicle related to climate tech and renewable energy hit all-time highs: SPACs, IPOs, M&A, Growth Equity, Venture Capital. While I am partial to the venture capital and growth equity stages, there has been a fascinating trend in the M&A markets that warrants a review.
The reason M&A is so exciting is because there is now a clear strategy delineation between firms inventing the new energy economy, adapting to this new framework, or trying to adjust exposure to catch minor tailwinds with the theme. But first, what is the new energy economy?
The new energy economy is the framework for our evolving energy supply and changing energy consumption habits. On the supply side, we have a growing interplay between renewables like wind and solar, alongside baseline fuels like natural gas and resilience structures like batteries. On the consumption side we have mobility going electric, energy efficiency products taking over residential and commercial avenues and new products like carbon credits gaining interest. Influencing these moving parts is the unknown of climate change and how our infrastructure can handle new perils like extreme flood, fire, and wind. Holding this jigsaw of interwoven parts together are new digital tools that are designing, balancing, and maintaining the whole structure. Artificial intelligence based design systems and predictive analytics are the pillars to the digital backbone of our new energy economy.
With that background, let’s review the 3 types of M&A events occurring now and what each event says about the participants.
#1 Building a New Energy Firm for the New Energy Economy
These acquirors are new company platforms, usually started in the past decade, that are purpose built for the new energy economy. These firms are digital-first and deliver real value by combining subject matter experts with next-generation digital tools. The acquirors in this case are already large, and are looking to bolt on other, energy-forward companies to complement product skill sets or geographic footprints.
Aurora acquires Helioscope: Aurora is the number one platform to design residential and commercial rooftop solar. The company is digitally aligned to help simplify the deployment of solar across the world and represents the best of the new energy economy. Aurora’s leadership was looking to add greater product strength in large scale commercial solar design and acquired Helioscope. This deal cements Aurora’s leadership and allows the firm to be a one-stop shop for any installer. They are built and growing exclusively focused on the new energy economy.
STEM acquires Also Energy: STEM, a recently public company, is the global leader in AI-enabled energy storage. The firm works with their customers to customize and manage batteries and energy loads across all usage profiles. Battery storage is very complementary to solar energy’s intermittent production characteristics. Also Energy, a technology platform for solar operations and maintenance, was therefore the opportune target for STEM to acquire as they look to bolster their brand from battery storage to a broader leader in energy operations and maintenance. These two combined companies now well-positioned for decades to come and will be synonymous with solar and battery pairing. Another similar transaction here is Vista Equity buying Power Factors.
SparkCognition acquires Ensemble Energy: SparkCognition is an AI-enabled data platform that helps Fortune 500 customers in nearly every vertical better optimize their business. The company’s solutions work very well in traditional …….