Ventizz study: M&A market for Clean Tech companies despite crisis

September 22, 2009

  • “Green energy” companies are future winners
  • Experts forecasting upswing as early as 2010
  • Financing is number one obstacle to growth

Despite the financial and economic crisis, the market for M&A transactions in the Clean Tech sector is characterized by relentless dynamism. This can be seen in the results of Wiesbaden University of Applied Technology’s current study “Private Equity Investments in Clean Tech”, which was conducted on behalf of Ventizz Private Equity AG. According to the study, this sector is characterized by a stable number of transaction enquiries, high potential purchase prices and the companies’ growing needs for capital.

The study surveyed M&A experts, corporate finance consultants and investment bankers, and found strong investor interest in Clean Tech. Around 50% of the participants in the study stated that the number of enquiries in the first quarter of 2009 was unchanged compared to the same period of the previous year, or even that it had increased. The purchase prices stated by respondents that can be recorded in this sector compared to other sectors remained at a correspondingly high level. In terms of EBITDA, the purchase prices thus identified were multiples of between 4.8 and 9.2.

The professionals surveyed believe that the long-term positive growth drivers in the Clean Tech sector will remain intact. As a result, the majority of the participants in the study believe that there will be an upswing as early as 2010. Those questioned identified the foreseeable scarcity of natural resources and, in particular, state intervention in the form of government programs or subsidies as being the driving forces for further growth in this industry. The experts believe that “green energy” companies in particular will be future winners. In addition to the solar and wind industries, which are already well established, this sector includes, in particular, energy efficiency.

“The participants highlighted financial bottlenecks as being the largest stumbling block for further growth in the Clean Tech sector, and this is in line with our experience,” commented Dr. Helmut Vorndran, Ventizz Private Equity AG’s CEO, summarizing the current situation. According to statements by the investment professionals surveyed, additional capital is needed in particular to expand the existing production capacity. “Clean Tech could grow much faster if it had better access to financing. Especially given current environment, the private equity sector can make a positive contribution in this segment by providing capital," explained Dr. Vorndran, describing the mutual benefits that increased involvement offers. 

When questioned on the criteria that sellers use when deciding to sell their companies, participants stated that the purchase price was the most important single factor. In addition, they also highlighted quality-based characteristics on the part of the investor, such as their track record or management’s knowledge of the market. Dr. Vorndran: “In future-proof industries such as Clean Tech in particular, intelligent capital and competent investors are must-haves for successful company growth.” Ventizz has already ascertained this in the past, and the study’s findings now underscore the importance of quality-based factors. “That means that money is not the sole deciding factor on who wins the bidding,” the CEO highlighted. 

A total of 62 select professionals participated in this expert survey. It was conducted online from April 8, 2009 to May 11, 2009, right in the middle of the current financial crisis, by Wiesbaden University of Applied Technology under the leadership of the private equity expert Prof. Stefan Jugel. A full evaluation of the survey can be downloaded from www.ventizz.de as of today. 

Facts on the M&A market for Clean Tech companies

Robust interest despite financial crisis

Around 20% of participants in the study stated that the number of enquires for M&A transactions increased in the first quarter compared to the previous year. A further 29% reported a constant level of interest.

Above-average multiples in CleanTech sector

In terms of EBITDA, the identified purchase prices were multiples of between 4.8 and 9.2. The maximum purchase price identified was a multiple of 20.

Reason for increasing capital: More output! 

When asked why companies were taking out more capital, around 27% of respondents stated that the funds were needed to increase production capacity. Working capital was stated in almost 23% of the responses.

Financing is the largest bottleneck for further growth

Around 31% of participants stated that financing not being secured was the most common obstacle to growth – which means that this sector is perfectly suited to capital-rich private-equity investors with strong expertise.

“Green energy” is tomorrow’s winner

One in five of the participants (21%) believes that the most successful Clean Tech companies in 2020 will be in the photovoltaic and solar sectors. 16% of participants stated energy efficiency (second place). Taken together, innovative energy generation, saving and storage accounted for around two thirds of the responses.

 

Company profile

Ventizz Capital Partners was formed in 2000 and has offices in St. Gallen and Düsseldorf. Ventizz Capital Partners exclusively advises the Ventizz private equity funds that offer equity capital for the growth of high-tech companies in the German-speaking region. Ventizz has three partners: Dr. Helmut Vorndran, Reinhard Löchner and Willi Mannheims. Together with a team of 13 professionals they currently advise four funds with capital under management totaling EUR 675 million. Ventizz Capital Fund IV L.P. is the largest of the four funds set up to date. After six months of fund-raising, this fund was closed at the end of 2007 with a volume of EUR 450 million and is thus one of the largest private equity funds for venture capital and medium-sized tech buy outs in the German-speaking region.

To date, Ventizz funds have invested in 31 companies focusing on renewable energy, medical technology, information and communication technology and on other branches of industry offering high value-added. In addition to a large number of trade sales, Ventizz has successfully placed three of its participating interests (ersol, SAF, PV Crystalox Solar) on the stock exchange.



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