WORLD ENERGY EFFICIENCY WHEELING & DEALING

Energy Efficient Sector M&A Scheduled to Accelerate In Second Half of Year
July 201 (Cascadia Capital LLC)

"In Q2 2011 equity financing and M&A were down from Q1 2011. This is partly due to Q1 being a very strong bounce back quarter as deals that were expected to close in Q4 2010 slipped in to Q1 2011. The other reason for the downturn is that Q2 2011 saw rotation in the sector as money left the capital intensive biomaterials/biofuels and solar sectors and moved into the more capital efficient energy efficiency sector…[E]nergy efficiency was the top sector in cleantech Q2 2011 with the largest amount of investment dollars ($428 million) and the largest number of deals (38).

"…[The Energy Efficiency] sector will explode with M&A transactions in Q3 2011 and Q4 2011. The Schneider Electric purchase of Summit Energy Services for $268 million was priced at approximately 4X revenue. Summit Energy offers a real time energy management solution that enables users to save energy…In addition to software margins, Summit also has a subscription based business model that pays on a monthly basis making it very attractive from a margin and visibility standpoint. Wall Street likes the Summit business model and puts a premium valuation on it."

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"…[T]he transaction signaled that the energy efficiency sector has come of age and put pressure on other large corporations in the energy services sector to strategically respond. The companies which have developed the product/technology are having a hard time accessing the large corporate clients that are buyers of their product…[Clients of large energy services companies] want real-time energy management products…[L]arge energy services companies [are expected] to gain…[that] capability through acquisitions.

"Cascadia…[has] spoken to approximately 60 potential target companies and more than 50 of those have been contacted by other potential buyers regarding a sale process. This leads…to the conclusion that the real-time demand management sector will see massive consolidation…"