M&A deals in smart grid, energy storage, electric vehicle sectors reaches US$2.4B in H1 2011, more than double US$1.2B exchanged in all of 2010; startups selling for low prices as dwindling venture funds go to late-stage investments, report finds
October 4, 2011
– Start-ups in the smart grid, energy storage, and electric vehicle sectors are selling at bargain prices as dwindling venture funds go to late-stage investments, says Lux Research.
Merger and acquisition (M&A) deals – just in the first six months of 2011 – have already totaled twice those made during all of 2010, and many more cash-starved smart grid, energy storage, and electric vehicle (EV) start-ups are due for the auction block, according to a new report from Lux Research. After reaching an all-time six-month high of $1.79 billion in H1 2010, venture funding for these start-ups had all but dried up in the subsequent twelve months. From July 2010 to June 2011, the three sectors landed only $1.54 billion from venture capitalists (VCs) – 72% of which was channeled into Series D and later-stage rounds.
M&A transactions totaled $2.42 billion in all three sectors during the first half of 2011 – more than double the $1.20 billion exchanged during all of 2010. Two deals comprised most activity in each year: ABB’s acquisition of Ventyx in 2010 ($1 billion), and Toshiba’s acquisition of Landis+Gyr in 2011 ($2.3 billion). All told, the electric vehicle, smart grid, and energy storage sectors saw a total of thirteen transactions in 2010, and another twelve during the first half of this year.
“As VCs have withdrawn from the smart grid, energy storage and EV sectors, they’ve left a crowded landscape of stranded, early-stage ventures without any means to finance demonstration pilots or manufacturing scale-up,” said Steve Minnihan, a Lux Research Analyst and the report’s lead author. “Not surprisingly, well-capitalized competitors and corporate players have swept in, looking to acquire valuable intellectual property, manufacturing capabilities, and client lists at bargain valuations.”
Among the report’s key findings:
Late stage deals overshadowing early seed funding. Seed funding and Series A deals have virtually disappeared for smart grid, energy storage, and EV start-ups as VCs focus their efforts on maturing companies in their portfolio rather than seeking new opportunities.
Acquirers prefer early-stage companies. Companies that received no outside funding accounted for 44% of all M&A transactions, while companies that completed a Series C round or later account for only 28% of acquisitions. Overall, acquirers in the smart-grid space are favoring low-value acquisitions of small companies with a technology or product that supplements their existing product portfolio and has some proven commercial adoption.
Automotive and fuel cell companies have drawn the most VC attention. The automotive and fuel cell segments combined represented 66% of all VC spending in 2011. Automotive continues to thrive thanks to six vehicle start-ups that have claimed $664 million since the beginning of 2010. Meanwhile, fuel cell companies raised $371 million over 39 transactions since the start of 2010.
The report, titled “Bargain Shopping – Acquisitions are Crucial as VCs Pass-Over Grid, Storage and Vehicle Ventures,” tracks trends in six key technologies: automotive, batteries, capacitors, fuel cells, non-electrochemical energy storage, and smart-grid technologies. Its analysis is based on over 712 VC, M&A and IPO transactions involving more than 219 companies in 24 countries through June 30, 2011.
About Lux Research
Lux Research provides strategic advice and on-going intelligence for emerging technologies. Leaders in business, finance and government rely on us to help them make informed strategic decisions. Through our unique research approach focused on primary research and our extensive global network, we deliver insight, connections and competitive advantage to our clients. Visit www.luxresearchinc.com for more information.