Source: Memoori Business Intelligence Ltd.
The value of pure Smart Grid M&A deals grew from $134 million in 2007 to $10.6 billion in 2011. Both the growth and now scale indicate that the supply side is gearing up to meet the requirements for new technology and the forecast demand for pure Smart Grid products and systems.
In the last 2 years both the volume and value of Smart Grid M&A grew rapidly, reaching 68 deals in 2010 having an average value of $155 million, whilst in 2011 some 49 deals had an average value of $225m. Cash financed up to 90% of the purchase price in 2011 which is much higher than normal, rising from 65% in 2010. We expect this figure to be around 75% by 2015.
Whilst the factors driving the massive growth in this fledgling business require restructuring and consolidation, confidence in the future has taken a hit. The current negative economic outlook is likely to counteract some otherwise strong drivers for deal making in the Smart Grid business.
As a result we forecast that the value of deals will fall over the next 3 years and will not return to 2011 levels until 2015. Value of Smart Grid M&A deals should reach $12 billion by 2016. Nevertheless we expect that the volume of deals will increase in the short term whilst the average value will fall to take in much smaller companies with annual revenues around $50 to $75 million.
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