Mercom Capital Group, llc, has released its report on funding and mergers and acquisition activity for the smart grid sector during 2012.
After a slow start, venture capital (VC) funding in the smart grid sector came in at $434 million in 40 deals, compared to $377 million in 50 deals in 2011. There were a total of 66 investors that invested in 2012 compared to 92 investors in 2011. Only six of the 40 deals were early stage transactions compared to 16 in 2011. The average VC funding round in 2012 was $10.9 million compared to $7.5 million in 2011. The $136 million raise by Alarm.com skewed the average deal size upward in 2012.
Despite struggles, Home and Building Automation companies continued to raise majority of the funding ($198 million in nine deals); followed by Demand Response ($82 million in 10 deals), Grid Optimization ($76 million in nine deals) and Advanced Metering Infrastructure (AMI) companies ($63 million in eight deals).
“It is fascinating to see these three distinct sectors, solar, smart grid and healthcare IT, converge into a single offering - the ’Connected Home’,” said Raj Prabhu, managing partner of Mercom Capital Group. “Home automation companies have struggled mightily over the years to entice consumers, but the convenience and savings created by the convergence of these technologies into one offering or platform might make it more appealing.”
The top VC deal in 2012 was the $136 million raised by Alarm.com from ABS Capital Partners, Equis Capital Partners, NJTC Venture Fund, and Technology Crossover Ventures; followed by $30 million raised by Silver Spring Networks, a smart meter networking company, from Hitachi; $25 million raised by Tendril, an energy management company, from VantagePoint, Good Energies, RRE Ventures, General Electric and Siemens; $23.3 million raised by GridPoint, an energy management company; and $16 million raised by demand response company Comverge from Triangle Capital Corporation.
There were some huge M&A transactions in smart grid in 2012. Though none of them were pure play smart grid companies, they all have smart grid product and service lines. A total of 23 M&A transactions were executed in 2012, amounting to almost $17 billion; compared to 30 transactions for almost $5 billion in 2011 and 40 transactions for $1.3 billion in 2010. M&A activity has been slowing down over the last few years as exits have been sparse.
Top M&A transactions in 2012 were the $11.8 billion acquisition of Cooper Industries, a grid and equipment company, picked up by Eaton; followed by the $2.3 billion acquisition of Elster, a smart meter company, acquired by UK investment company Melrose; and the $2 billion acquisition of Vivint, a security and home automation services company (similar to Alarm.com) by Blackstone. Other top M&A transactions were the $382 million acquisition of RuggedCom, a provider of rugged communications equipment like routers and ethernet switches for substations, which got snatched up by Siemens, and the $183 million acquisition of ZIV Group, a smart grid and automation solutions provider, acquired by Crompton Greaves.