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© 2018 RocSearch. All Rights Reserved. 1
UK Energy Management Systems
(EMS) Market LandscapeSample Deliverable
© 2018 RocSearch. All Rights Reserved.
Table of Contents
▪ Executive Summary 02-07
▪ Market Definition and Value Chain 08-10
▪ Market Size and Growth Outlook 11-13
▪ Growth Drivers and Inhibitors 14-16
▪ Market Trends and Their Impact 17-20
▪ Key Energy Regulations 21-23
▪ Competitive Landscape 24-31
▪ Mergers and Acquisitions 32-37
▪ Investment-worthy Opportunities 38-53
▪ Appendix 54-60
© 2018 RocSearch. All Rights Reserved. 3
Energy Management Systems have a wide array of end-users from households to power generation
companies, creating a c. £XXbn market that is expected grow at XX% for the next 5 years
Executive Summary (1/5) UK Energy Management Systems Market Study
Sources: RocSearch analysis across secondary data sources; Primary interviews with 15+ senior stakeholders in the EMS sector; Scanning 1,000+ companies in the EMS sector as part of the RocEye deal origination study
1) Energy Management Systems Market Definition
1.1) Application Areas
▪ The Energy Management Systems’ market in the UK includes:
• Products and Devices that connect to all electric equipment (HVAC, Lighting, IT Infrastructure etc.) within a residential or commercial establishment to gather and monitor energy consumption data
• Software and Related Service that provide Energy Data Services, Advanced Data Analysis, Invoice Management, Emissions Forecasting, Bill Validation, Predictive Maintenance, Energy Usage Reporting, Asset
Tracking, etc.
• Professional Services include Energy Surveys, Energy Performance Inspections, Reporting, Training, Audit and Certification, etc.
▪ These solutions find wide application across the entire energy lifecycle from power generation to distribution to final consumption by domestic and commercial customers
1.2) Segment Characteristics, Size and Outlook
▪ This study estimates the overall Energy Management Systems Market to be currently worth c. £XXbn and is expected to reach c. £XXbn by the end of 2022, growing at XX% CAGR
▪ Energy management products/ services are shaped by the distinct requirements of the end-user at different stages of the lifecycle and therefore, the market is segmented based on the type of end-user as:
• Industrial Energy Management System
- This end market includes Utilities (power generation companies, transmission and distribution companies) and Industrial establishments (manufacturing plants, industrial complex)
- The market is currently worth c. £XXbn and is expected to reach £1XXbn by the end of 2022, growing at XX% CAGR
• Building Energy Management System
- This end market includes commercial buildings, offices, hospitals, government and public buildings and similar establishments
- The market is currently worth c. £XXbn and is expected to reach £XXbn by the end of 2022, growing at XX% CAGR
• Home Energy Management System
- This end market includes homes and residential establishments
- The market is currently worth c. £0.3bn and is expected to reach £0.5bn by the end of 2022, growing at 12% CAGR
▪ UK continues to be one of the largest markets in Europe, although some experts believe that it is not at the forefront of technology adoption, especially in the Home Energy Management segment. This also explains the
relatively smaller size of the Home EMS segment.
© 2018 RocSearch. All Rights Reserved.
Table of Contents
▪ Executive Summary 02-07
▪ Market Definition and Value Chain 08-10
▪ Market Size and Growth Outlook 11-13
▪ Growth Drivers and Inhibitors 14-16
▪ Market Trends and Their Impact 17-20
▪ Key Energy Regulations 21-23
▪ Competitive Landscape 24-31
▪ Mergers and Acquisitions 32-37
▪ Investment-worthy Opportunities 38-53
▪ Appendix 54-60
© 2018 RocSearch. All Rights Reserved. 5
Energy management solutions (products, software and services) are used by utilities, industrial facilities,
commercial establishments and households to achieve cost savings through higher consumption efficiency
Market Definition UK Energy Management Systems Market Study
Sources: Presentation HEMS – Michigan Technological University (2016); Airedale; Bresaer; Mordar Intelligence; MarketsandMarkets; Advanced Energy Economy
Building Energy Management System
▪ End Market
Covers large segment load – commercial buildings, offices, hospitals,
government and public buildings and similar establishments
▪ Application Area
Used to control, monitor and optimise energy consumption of a building’s
systems such as lighting, HVAC and plant room equipment
▪ Major Players
ABB, XXX
Home Energy Management System
▪ End Market
These systems are designed for residential load
▪ Application Area
Used to monitor and optimise consumer’s energy consumption. Smart meter,
smart sensors, smart appliances are a few of the key components of HEMS
▪ Major Players
Sharp, PassivSystems, XXX
Industrial Energy Management System
▪ End Market
These systems are designed for utilities, manufacturing
facilities and any industrial complex
▪ Application Area
Typically used in electric substations, boiler plants, cogeneration plants,
electrical and thermal fluid distribution lines, pumps and fans, HVAC
systems, lighting systems
▪ Major Players
Cisco Systems, XXX
Energy Management
System
Based on the end-user application, EMS is classified into Home Energy Management System (HEMS), Building Energy Management System (BEMS), and Industrial Energy Management System
(IEMS)
© 2018 RocSearch. All Rights Reserved.
Table of Contents
▪ Executive Summary 02-07
▪ Market Definition and Value Chain 08-10
▪ Market Size and Growth Outlook 11-13
▪ Growth Drivers and Inhibitors 14-16
▪ Market Trends and Their Impact 17-20
▪ Key Energy Regulations 21-23
▪ Competitive Landscape 24-31
▪ Mergers and Acquisitions 32-37
▪ Investment-worthy Opportunities 38-53
▪ Appendix 54-60
© 2018 RocSearch. All Rights Reserved. 7
As one of the largest markets in the region, the UK Energy Management Systems market is estimated to be
worth c. £XXbn (c. 15% of Europe) and is forecasted to grow by more than XX% during 2017-22
Market Size & Growth Outlook UK Energy Management Systems Market Study
Sources: PwC, TEAM Energy, Wattics, RocSearch Analysis, Primary Interviews
0.23 XX XX XX XX XX XX XX XX
0.60 XX XX XX XXXX
XXXX
XX0.68
XXXX
XXXX
XX
XX
XX
XX
2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E
Industrial Energy Management System
Building Energy Management System
Home Energy Management System
UK EMS MARKET SIZE - £BN (2014 – 22)
Key Observations
▪ By the end of FY 2018, the UK Energy Management Systems market is expected to be worth
£XXbn accounting for c. 15% of the overall European market
▪ UK has traditionally followed other countries like Germany, France, and Denmark, who have
been at the forefront of new EMS technology adoption
▪ Though the legacy systems have been in existence for quite a long time, but recently, connected
devices (IoT, AI) are making inroads in the UK market gradually
▪ Large globally diversified players like Schneider, XX, etc. account for c.XX% of the market and
the remaining market is highly fragmented
• “The market is not very mature. EMS that control energy consumption in a building, those
have been around for a long time but at the same time, many of them were not internet
compatible” – Director, ABC
• “The energy management and metering side, is very crowded and there are a lot of players
out there. So, there are old school players who have been there for 25 years like Siemens
and then again there are lots who operate in the market” - MD, ABC
• “The UK comprises almost 10-15% of the European Market. Germany is the market leader,
Germany and France have about 15-20% each of the market” - Managing Director, ABC
1.50XX
XXXX
XX
XX
XXXX
XX
Industry Speak
CAGR 2014-17 CAGR 2017-22
XX% XX%
XX% XX%
XX% XX%
9% 12%
© 2018 RocSearch. All Rights Reserved. 8
While industrial customers (manufacturing, engineering, etc.) have been heavy adopters of energy
management solutions, the commercial sector (hospitality, banking, etc.) is catching up
Market Size & Growth Outlook UK Energy Management Systems Market Study
Sources: PwC, TEAM Energy, Wattics, RocSearch Analysis, Primary Interviews
Key Observations
By End Markets:
▪ Industrial customers (manufacturing, engineering, construction) are heavy adopters of EMS; Commercial establishments (Consumer
goods, Hospitality & Leisure, Banking & Capital) are slow adopters; and SMEs will emerge as a major underserved market segment
• 33% industrial firms and 20% commercial organizations plant to invest £1.0mn in smart energy technology in the next 5 years
• Leading companies have announced energy efficiency targets for 2020- P&G will power its plants with 100% renewable energy and
Walmart will reduce building energy intensity by 20% from 2010 levels
▪ Adoption in the residential sector is expected to remain sluggish with a vast majority of respondents unwilling to spend on smart home
systems in next 2 -5 years
By Offerings:
▪ Software and consulting together constitutes XX% of the EMS market
▪ Abundance of data, upgradation of existing solutions, demand for specialized solutions for complex applications are few factors driving the
demand
By Deployment Model:
▪ XX – XX% of the energy management software market consists of on-premise software; availability of in-house IT team and low
infrastructural cost are few factors driving the demand for this deployment model
▪ Cloud based model is gaining traction as it offers easy data accessibility, reduces software development and maintenance cost, and
sensitive data recovery
Industry Speak
▪ “Commercial & Industrial market is growing at about 5-8% p.a., it might grow further if there are some structural shifts in the way the
things are done, particularly with outsourcing, so some of the major clients are beginning to outsource energy management as a service
and that’s making the sector grow” – Technical Director, ABC
▪ “Services would have higher potential to grow, especially the managed services. Managed services would have a higher % share in
future due to Cost-saving mechanism by the companies” – Manager, ABC
XX%
XX%
XX% Software & Related Services
Products/Devices
Consulting
UK EMS MARKET BY OFFERINGS (2017)
100% =
£XXbn
XX%
XX%
On-Premise Hosted
UK ENERGY MANAGEMENT SOFTWARE MARKET BY
DEPLOYMENT MODEL (2017)
100% =
£XXbn
XX%
XX%
XX%
Home EMS
Building EMS
Industrial EMS
UK EMS MARKET BY END MARKETS (2017)
100% =
£XXbn
© 2018 RocSearch. All Rights Reserved.
Table of Contents
▪ Executive Summary 02-07
▪ Market Definition and Value Chain 08-10
▪ Market Size and Growth Outlook 11-13
▪ Growth Drivers and Inhibitors 14-16
▪ Market Trends and Their Impact 17-20
▪ Key Energy Regulations 21-23
▪ Competitive Landscape 24-31
▪ Mergers and Acquisitions 32-37
▪ Investment-worthy Opportunities 38-53
▪ Appendix 54-60
© 2018 RocSearch. All Rights Reserved. 10
Regulatory compliance, incentives for SMEs in select sectors and the proliferation of data across the energy
value chain is driving Utilities and businesses to recognize the value of energy management software
Growth Drivers UK Energy Management Systems Market Study
Sources: European Commission; European Council; The Energyst; Mordar Intelligence; DailyStar; Gov.uk; Primary Interviews
1
2
34
5
Regulatory obligations
▪ The EU Emissions Trading Scheme which aims to reduce
GHG emissions by at least 40% by 2030 and the revised
Energy Efficiency Directive which sets an energy efficiency
target of 32.5% for the EU for 2030 will drive the demand for
BEMS and IEMS
Government support and initiatives
▪ In June 2018 the UK government granted
£8.8mn to SMEs in the hospitality and retail
sectors to help them evaluate technologies
to control energy usage
▪ Roll out of smart meters in the UK by 2020,
will drive demand for energy efficiency
software and servicesProliferation of data across the energy value chain
▪ With abundant data from smart meters and IoT,
Utilities are recognizing the value of energy
management software to meet their peak demand
and efficiency goals
▪ Businesses are moving towards more centralized
energy management solutions with a focus on
automated energy data collection and reporting
CSR and brand equity
▪ Even beyond regulatory mandates, large
organisations are setting sustainability goals
and investing in sustainability management
solutions to meet the requirements of their
investors, customers and suppliers
▪ BAE Systems, BT, Unilever, Walgreens Boots
Alliance, and WPP are some of the leading
examples
Rising energy prices
▪ Businesses are deploying sophisticated EMS to monitor
and control their energy spend and counter the sharp
increase in prices
▪ With Electric Vehicles sales expected pick up by 2020, the
required charging point infrastructure will drive innovation
across energy management devices and software
High
LowImpact on EMS
“Many cities in the UK have said that they’ll stop producing diesel cars by 2050 and there will be
an uptake of electric vehicles, electric charging points” – Operations Director, ABC
“Residential by far will drive the industry. People are more used to giving out their data on Amazon
Alexa and Google Home like their name, age, address, what time they leave the house and when they
enter. People want to make their lives more efficient and bring down costs” – MD, ABC
Industry Speak
Industry Speak
© 2018 RocSearch. All Rights Reserved. 11
Network hackers destroying critical power infrastructure and abusing smart home devices, and initial high
investment cost are among the major deterrents for the industry
Inhibitors UK Energy Management Systems Market Study
Sources: Wired; ESET; Venture Outsource; Allied Market Research; Ready One; Organization for Economic Co-operation and Development;
2▪ Integration with third-party software vendors such as salesforce.com and IBM’s Cast Iron middleware often has
compatibility issues, requiring separate vendors for maintenance as users cannot update data and linkages
▪ Although EMS vendors carefully script front-end macros, proprietary algorithms and other data-proofing tools, data
integrity continues to be a challenge while integrating with ERP solutions
Interoperability
and Data Integrity
Challenges
High
LowImpact on EMS
▪ High initial set-up cost, along with the long payback period, is one of the major inhibitors of the industry
▪ Traditional deployment of a Building Energy Management System varies between £2 – £6 per square foot and it could
take up to 4 years to recover the initial investment.
▪ There is also a high operational and maintenance cost involved post deployment
1High Initial
Investment Cost
3
▪ The energy efficiency policy and its goals in an organisation are generally defined by its senior management team
▪ Any EMS spend is considered as an operating expense. There is also limited awareness of the latest energy
management solutions
▪ The above factors, coupled with budgetary limitations and extended wait period to realise any return on investment,
often makes the management team disinclined towards making sizeable commitments
Organisational
Barriers
4▪ Increased connectivity among between power generation plants, distribution grids and smart homes also increases
the vulnerability of these networks to cyber threats
▪ In 2015 and 2016, Ukraine’s power grid was attacked by the industrial control systems malware – Industroyer; as a
result of which Ukrainian capital Kiev was hit by a blackout
Cyber Threats
© 2018 RocSearch. All Rights Reserved.
Table of Contents
▪ Executive Summary 02-07
▪ Market Definition and Value Chain 08-10
▪ Market Size and Growth Outlook 11-13
▪ Growth Drivers and Inhibitors 14-16
▪ Market Trends and Their Impact 17-20
▪ Key Energy Regulations 21-23
▪ Competitive Landscape 24-31
▪ Mergers and Acquisitions 32-37
▪ Investment-worthy Opportunities 38-53
▪ Appendix 54-60
© 2018 RocSearch. All Rights Reserved. 13
UK government’s plans to install more smart meters, the EU directive for smart homes and favourable
mortgage terms for green buildings are impacting the entire EMS device and software ecosystem
Market Trends and Their Impact UK Energy Management Systems Market Study
01
02
03
Ambitious smart meter rollout
scheme by the UK government
Increasing number of smart
buildings in the UK and rest of
Europe
Growing popularity of Green
Mortgages for energy efficient
homes
▪ The government plans to install XXmn smart gas and
electricity meters by 2020 with an investment of £XXbn,
to help citizens reduce their energy expenditure
▪ So far, more than 10mn meters have been installed in
the UK
▪ In 2016, the EU proposed revisions to the Energy
Performance of Buildings Directive to ensure buildings
use energy efficiently with the help of information and
communication technology
▪ Between 2014-16, 42 smart building projects were given
a grant of £270mn by the EU commission
▪ Introduction of Clean Growth Strategy by the UK Govt
▪ Less likelihood of default on payment terms of energy
efficient home owners because of higher disposable
incomes
▪ Smart meters are the enabling asset for deploying energy
management software and IT infrastructure
▪ The government push for installing smart meters will drive
demand for energy management services and software that
use smart meter data
▪ Proliferation of energy saving devices ranging from smart
HVAC, smart plugs, smart lightings. Building Automation
System Optimization, etc., deployed
▪ Rise in small size, interoperable hardware
▪ In 2018, 37 EU banks launched pilot scheme with lower
interest rates for energy efficient homes2 . Such homes use
HEMS to monitor and control their energy consumption
▪ Green mortgages could result in the savings of £47bn in the
UK, as demand for energy efficiency technologies and
services increases
Drivers Impact
Sources: Telegraph, Mordar Intelligence, The Guardian, Anesco, Prime Energy, Smartestenergy,Financial Times, Gentrack, Energylivenews, IEEE, Primary Interviews, Climate Action, BusinessGreen, World Green Building Council
1 2 3
▪ “Roll out of smart meters in the UK by 2020 that will enable suppliers to create innovative products rather than just a single standard tariff, moving towards time-based tariffs” – Director, ABC
▪ “Another driver could be the heat control costs and to control costs, you might have energy management systems for building, more active occupancy control systems” – Director, ABC
Note: (1) Clean Growth Strategy sets out Government proposals for decarbonising all sectors of the UK economy through the 2020s (2) A building that has a very high energy performance and requires nearly zero or very low amount of energy
Industry Speak
© 2018 RocSearch. All Rights Reserved.
Table of Contents
▪ Executive Summary 02-07
▪ Market Definition and Value Chain 08-10
▪ Market Size and Growth Outlook 11-13
▪ Growth Drivers and Inhibitors 14-16
▪ Market Trends and Their Impact 17-20
▪ Key Energy Regulations 21-23
▪ Competitive Landscape 24-31
▪ Mergers and Acquisitions 32-37
▪ Investment-worthy Opportunities 38-53
▪ Appendix 54-60
© 2018 RocSearch. All Rights Reserved. 15
The market is consolidated at the top level, with a long tail of mid-to-small diversified and pureplay players.
Diversified players have a c. XX% market share with a few (c. XX) large players having a c. XX% market share
Landscape of EMS Companies in the UK UK Energy Management Systems Market Study
Sources: RocSearch Analysis, Primary Interviews
XX Diversified EMS Companies XX Pureplay EMS Companies
I II III IV
The B2B market with products/ services that can go straight to
the customers’ commercial establishment (e.g. GE and
Siemens) is very consolidated – SMAP, ABC
Certain segments such as smart meters and
metering data services are more crowded,
with a number of regional and global players
operating in this segment – Managing
Director, ABC
I. GLOBAL LEADERS II. DIVERSIFIED MID TO SMALL SIZE III. PUREPLAY COMPANIES WITH GLOBAL REACH IV. REGIONAL PUREPLAY COMPANIES
GEOGRAPHIC REACH Global Global and Regional Global Regional
BUSINESS FOCUS Diversified Diversified Pureplay Pureplay
NUMBER OF COMPANIES c. XX c. XX c. XX c. 120
MARKET SHARE c. XX% c. XX% c. XX% c. 20%
TYPES OF PLAYERS Schneider, Honeywell, ABC BPP Technical Services, ABC Generis Technology, ABC STC Energy Management, ABC
Re
ve
nu
e (
No
t T
o S
ca
le)
£0bn
£0.5bn
£90bn
Note: Diversified players include global tech giants like IBM and Cisco, professional service leaders like Booz, BCG and Deloitte. While the total revenue of these firms is high, their overall focus on energy management related products and services is limited
© 2018 RocSearch. All Rights Reserved. 16
The market is headed towards consolidation with EMS companies and Utilities, scouting for targets to
enhance their service capability and acquire an established customer base
Trends Shaping the Competitive Landscape UK Energy Management Systems Market Study
Sources: RocSearch Analysis, Primary Research Discussions with ABC
01Market is heading from many
niche companies, to having a
few end-to-end solution
providers
▪ EMS market in the UK used to be fragmented with a number of specialised players. With multiple stakeholders scouting for
targets, the market is moving towards consolidation
▪ As companies look to become end-to-end solution providers, the market is expected to become more challenging for small
independent EMS companies
▪ Lack of technological differentiation and long sales cycle is also leading smaller players to lose out to established players
02Competition to acquire new
customers is driving large
diversified players to acquire
▪ The move towards consolidation isn’t necessarily about one software company acquiring another, it also includes service
companies trying to acquire energy management software providers
▪ Energy procurement and professional services firm, Inspired Energy, has done 10 acquisitions in the last 6 years, some of
which were more from a customer acquisition perspective than for capability augmentation
▪ XXX, considers any company in this sector with revenue more than €10mn and a stable growth rate as a target. Within
each niche, they focus on buying the top 3 players and then integrating their clients with XXX.
03Utilities are developing energy
management software
capability through acquisitions
and partnerships
▪ Utility companies have been scouting for energy management software companies for a few years now. Npower, XXX
have all either acquired or patterned with a software company in the last 5 years
▪ Utilities also want to be exclusive. They want their partners to work with them only and at times end up investing in these
small companies.
▪ If an energy management software company approaches a Utility to sell their product, the Utility may reject it because their
competitor is an investor or a partner of that company
“I’m starting to see a trend of consolidation now. Before it was fragmented where you had specialists in certain areas but now you have the big players, the consultancies, traditional EMS and
Utilities” – Consulting Director, ABC
Industry Speak
© 2018 RocSearch. All Rights Reserved. 17
Collaborating for next generation product development, securing favourable contract terms or investments
from large Utility clients, all the while ensuring healthy margins can help EMS companies scale-up fast
Key Success Factors for an EMS company UK Energy Management Systems Market Study
Sources: RocSearch Analysis, Primary Interviews
▪ Typical sales cycles for companies selling to Utilities is between 6-
12 months. Several small & mid-sized EMS companies in the UK
are struggling to make profits
▪ EBITDA Margin is therefore a key financial benchmark for any
EMS company in the UK
▪ Types of customers, contract length and contract renewal are key
success determinants for energy management software company
▪ Business partnerships and collaboration for product innovation is
critical for successfully scaling-up an EMS company
▪ Getting products/services to the end consumers through the
right channels (B2B, B2B2C) is paramount for the business
▪ In case of the B2B channel, EMS companies who are able to
secure R&D partnerships or investment from the Utility, they
are catering to, will scale-up faster
▪ EMS companies must continually invest in innovative
products, as customers are moving away from traditional
solutions
▪ Customers expect next generation offerings that include – AI,
advanced analytics, cloud solutions, etc.
▪ Companies are incurring high cost to capture huge
amounts of energy usage data
▪ This data is largely under utilised, as many EMS
companies provide only basic analysis and stop
short of deploying tools for much wider insights
1
2
3
4
5
“Dozens of companies in the UK are still struggling to be
profitable. The financial performance of the company is the major
KPI in this sector” –Solutions Director, ABC
“Majority of the new entrants (small players) fall in the
B2B2C group where they are trying better
communicating with the customers (engaging the
customers)”– Co-founder, ABC
“The customers are moving from 1st generation products to
the new generation products (evolved overtime, AI, modern
analytics, Cloud-based, compatible with different
equipment). In the UK market, some players are still doing
what they did a few years ago, not changing with times”–
Director, ABC
“Utilities are most receptive to offers (products/ service) that can
be utilized for their internal use and for their end customers as
well (ability to upsell)” – Co-founder, ABC
© 2018 RocSearch. All Rights Reserved.
Table of Contents
▪ Executive Summary 02-07
▪ Market Definition and Value Chain 08-10
▪ Market Size and Growth Outlook 11-13
▪ Growth Drivers & Inhibitors 14-16
▪ Market Trends and Their Impact 17-20
▪ Key Energy Regulations 21-23
▪ Competitive Landscape 24-31
▪ Mergers and Acquisition 32-37
▪ Investment-worthy Opportunities 38-53
▪ Appendix 54-60
© 2018 RocSearch. All Rights Reserved. 19
Players seeking product innovation and market share are driving consolidation in the UK EMS market; deal
activity is being driven by large diversified players, Utilities and PE/ VC firms
M&A Landscape UK Energy Management Systems Market Study
Sources: Greentech Media, alertme, Oracle, Fusion Corporate Partners, RocSearch Analysis, Primary Interviews
M&A
Landscape
I. Market Moving Towards Consolidation
▪ A number of factors including: presence of a large number of niche
players; move towards end-to-end solution capability; product capability
augmentation and/ or customer acquisition; have all contributed to
creating an active M&A market
II. Private Investment in the EMS Sector
▪ Close to XX pureplay companies received private capital investment in the
last one decade (2007 to 2017). While a number of these investments
were made by VC firms, PEs (lower mid-market and mid-market focussed)
such as LDC Managers, Alinda Capital, ABC, have also been active
III. Large Diversified EMS Players as Aggressive Buyers
▪ Players like Inspired Energy and Honeywell have been acquiring for both
capability augmentation and customer acquisition
IV. Utilities Pursuing Capability Augmentation
▪ Utilities have been scouting for companies for a few years now. Npower,
ABC have acquired or invested in an energy management software
company in the last 5 years
V. Other M&A/ Investment Trends in the UK and the US
▪ Lately, investments from the US, China, New Zealand, and Germany have
poured in the UK energy management sector
▪ In the US, tech giants Google and Oracle are acquiring energy software
companies. Technology maturity, stagnant revenue and building customer
centric business are driving this trend
1 2 3 4 5
Case 1: Private Investment in the EMS Sector
▪ Alinda Capital Partners, the US-based PE house acquired Energy Assets Group, the UK based and listed gas
metering company in 2016 for £285mn
▪ Alinda Capital Partners considered it an attractive opportunity and Energy Asset was well positioned to provide
both diversification and growth potential
Case 2: Large Diversified EMS Players as Aggressive Buyers
▪ Between 2012 and 2018, Inspired Energy an energy procurement and energy management company acquired 10
EMS companies in the UK
▪ Inspired Energy’s targets include energy procurement consultants, energy consultancy for Utilities, online
electricity and gas price comparison platforms, billing software and energy management software companies
Case 3: Utilities Pursuing Capability Augmentation
▪ British Gas, supplier of energy in the UK, acquired AlertMe, a developer of platforms for running various domestic
“smart” devices, in 2015 for £65mn
▪ The acquisition created a win-win situation for both the parties - AlertMe got access to the huge customer base of
British Gas while British Gas was able to offer IoT (connected home) complimentary services to its consumers
Case 4: M&A Trends in Other Developed Markets
▪ In the US, Oracle acquired Opower, a cloud-based energy software company, in 2016 for £366mn
▪ Opower cloud energy software has complimented Oracle’s existing business, which now has better control over
the entire value chain of the business - from power generation plants to consumers
© 2018 RocSearch. All Rights Reserved. 20
Since 2015, the UK energy-management software market is heading towards gradual consolidation where the
majority of acquisitions are initiated by the software/analytics companies
M&A Landscape UK Energy Management Systems Market Study
Sources: MergerMarket, RocSearch Analysis, Primary Interviews
Energy Management
Software/ Analytics/
Consulting
2011 2012 2013 2014 2015 2016 2017 2018
Bid
de
r In
du
str
y
Software Target
EDW + TEAM
Bidder + Target
Private Equity
Inspired Energy + FEM
Inspired Energy + HEG
Octopus Investments +
Reactive Technologies
Alinda Capital Partners +
Energy Assets
Inspired Energy + STC
Energy
Accenture + EnergyQuote
Utilitywise + t-mac
Technologies
Amadeus Capital +
Cambridge Clean Energy
Inprova Group + UES
Energy
Ameresco +
Energyexcel
NorthEdge Capital +
Utiligroup
Scottish Equity Partners +
Anesco
Intermediate Capital +
Inenco
Ameresco + Energy
Services Partnership
Alpina Capital Partners
+ Wireless Energy
Management
Enterprise Ventures/PHD
Equity Partners + Vickers
Electronics
CBPE Capital + Anesco
Gentrack Group +
Evolve Analytics
Inspired Energy +
SystemsLink 2000
LDC (Managers) +
ENSEK
Energy Services Group +
Utiligroup
Gentrack Group + Junifer
Systems
Smart Metering Systems
+ Trojan Utilities
Business-intelligence of
Oriental Nations Corp +
Cotopaxi
LDC (Managers) +
Stroma
Legend
August Equity + Zenergi
Morrison Data Services +
Meter-U Ltd
First Reserve + Morrison
Data Services
Anthesis Consulting
Group + Sustain
Grovepoint Capital /
Rubicon Partners +
Enserve Group
Smart Metering Systems
+ Utility Partnership Ltd
RCapital Partners + Four
Seasons Group
The Energy Solutions
Group + Evolve Energy
Inspired Energy +Direct
Energy Purchasing
MITIE Group +Utilyx Ltd
Note: (1) Kinect Energy Group was previously known as Orchard Energy
1 2 3 4 5
Utility
British Gas + AlertMeWorld Fuel Services
Europe + Kinect Energy
Group1
RWE npower + RUMMSSE Plc + Energy
Solutions Group
Non-Utility Lakehouse + Orchard
Energy
Lloyd's Register + Senergy
Ltd
Balfour Beatty WorkPlace +
Ecova
© 2018 RocSearch. All Rights Reserved. 1
Private Equity firms and Utility companies concluded the maximum number of deals with revenue multiple
greater than 4.0x
Comparable Transactions: Revenue Multiple UK Energy Management Systems Market Study
COMPARABLE TRANSACTIONS: REVENUE MULTIPLE
6.3x
0.8x
4.3x
1.8x
1.0x
3.2x
0.4x
6.1x
0.8x1.3x
2.1x
6.3x
4.3x
1.4x
2.0x2.6x
TARGETEnergy Assets
GroupAnesco Inenco Group Enserve Group Four Seasons
STC
EnergyCotopaxi
t-mac
TechnologiesEnergyexcel
Utility
PartnershipUtilyx RUMM AlertMe.com
The Energy
Solutions
Group
Orchard (Holdings)
UKPower Efficiency
AcquirerAlinda
Capital
Scottish
Equity
Partners;
Hermes GPE
Intermediate
Capital Group;
Vitruvian
Partners
Grovepoint
Capital;
Rubicon
Partners
RCapital
Partners
Inspired
Energy
Business-
intelligence of
Oriental Nations
Utilitywise Ameresco
Smart
Metering
Systems
MITIE Group RWE npower British Gas SSE LakehouseBalfour Beatty
WorkPlace
%
Acquired100% 40% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 79% 100% 100% 100%
Deal
Value285.0 17.0 140.0 41.0 30.0 12.0 18.0 22.0 5.0 14.0 14.0 8.0 56.0 66.0 10.0 18.0
EV 285.1 42.5 140.0 41.4 30.1 12.0 18.1 22.0 5.4 14.0 14.0 8.0 65.0 66.0 10.0 18.7
Revenue 45.3 55.1 32.3 22.6 30.0 3.8 47.9 3.6 6.4 11.1 6.6 1.3 15.0 45.8 5.0 7.2
Date 4/2016 9/2013 7/2013 1/2016 11/2013 11/2015 5/2015 4/2015 8/2014 4/2014 1/2012 4/2015 2/2015 7/2014 7/2015 4/2011
Median: 2.1x
Bidder
Industry
Sources: MergerMarket, RocSearch Analysis
1 2 3 4 5
Private Equity Energy Software/Analytics Utility Non-Utility
© 2018 RocSearch. All Rights Reserved. 2
The EBITDA multiple for majority of the deals between 2011-15 was less than or approximate equal to the
industry median 12.6x
Comparable Transactions: EBITDA Multiple UK Energy Management Systems Market Study
COMPARABLE TRANSACTIONS: EBITDA MULTIPLE
12.7x 12.0x 9.9x
25.9x
12.5x
73.3x
5.3x
7.8x
31.0x
38.9x
9.7x14.8x
10.9x
20.9x
Median: 12.6x
Bidder
Industry
Sources: MergerMarket, RocSearch Analysis
1 2 3 4 5
TARGETEnergy Assets
GroupAnesco Inenco Group Enserve Group Four Seasons
STC
EnergyCotopaxi
t-mac
TechnologiesEnergyexcel
Utility
PartnershipUtilyx RUMM AlertMe.com
The Energy
Solutions
Group
Orchard (Holdings)
UKPower Efficiency
AcquirerAlinda
Capital
Scottish
Equity
Partners;
Hermes GPE
Intermediate
Capital Group;
Vitruvian
Partners
Grovepoint
Capital;
Rubicon
Partners
RCapital
Partners
Inspired
Energy
Business-
intelligence of
Oriental Nations
Utilitywise Ameresco
Smart
Metering
Systems
MITIE Group RWE npower British Gas SSE LakehouseBalfour Beatty
WorkPlace
%
Acquired100% 40% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 79% 100% 100% 100%
Deal
Value285.0 17.0 140.0 41.0 30.0 12.0 18.0 22.0 5.0 14.0 14.0 8.0 56.0 66.0 10.0 18.0
EV 285.1 42.5 140.0 41.4 30.1 12.0 18.1 22.0 5.4 14.0 14.0 8.0 65.0 66.0 10.0 18.7
EBITDA 22.5 3.5 14.1 1.6 - 1.0 - 0.3 1.0 1.8 0.5 0.2 6.7 4.5 0.9 0.9
Date 4/2016 9/2013 7/2013 1/2016 11/2013 11/2015 5/2015 4/2015 8/2014 4/2014 1/2012 4/2015 2/2015 7/2014 7/2015 4/2011
Private Equity Energy Software/Analytics Utility Non-Utility
© 2018 RocSearch. All Rights Reserved.
Table of Contents
▪ Executive Summary 02-07
▪ Market Definition and Value Chain 08-10
▪ Market Size and Growth Outlook 11-13
▪ Growth Drivers and Inhibitors 14-16
▪ Market Trends and Their Impact 17-20
▪ Key Energy Regulations 21-23
▪ Competitive Landscape 24-31
▪ Mergers and Acquisitions 32-37
▪ Investment-worthy Opportunities 38-53
▪ Appendix 54-60
© 2018 RocSearch. All Rights Reserved. 23
XXX: Platform Target Profile UK Energy Management Systems Market Study
BUSINESS
DESCRIPTION
Offers energy data collection reporting and data analytics
services
PRODUCTS &
SERVICES
Energy Data Services, Broad Reporting, Advanced Data
Analysis, Invoice Management, Training and Webinars,
Monitoring and Targeting, Query Management, Supply Capacity
Reset, Compliance Solutions, Multi-Site Project Management
GEOGRAPHIC
PRESENCEUnited Kingdom and United States
END MARKETSRetail, Property, Construction, Renewable Energy, Government
& NGOs, Energy & Utilities, Education
OWNERSHIP▪ Family owned. Owned by XXX and family
▪ XXX is the Managing Director
INVESTMENT RATIONALE
▪ Family Owned BusinessXXX is a closely held, family owned
business with XXX as its Chairman and
XXX as its MD
▪ Vintage Company with Large
ClienteleOver 3-decades of experience in energy
data software and services. 1,200+
clients across retail, commercial,
industrial, utilities and the hard to enter
government and public sector market
▪ Fast Growing Top and Bottom
LineIn the 3-years from 2015 to 2017, its
revenue grew by more than XX% and its
EBITDA grew by more than 30%
▪ Growing MarginsFrom 2015 to 2017 its EBITDA Margin
grew from 18.1% to 22.5%
▪ Business ExpansionIn August last year, XXX opened a new
40 people office in Blackpool
REVENUE (£MN) & EBITDA MARGIN (%)
RECENT DEVELOPMENTS
MANAGEMENT
NAME DESIGNATION DoJ EMAIL
ABC Managing Director 2011 [email protected]
ABCFinance and Commercial
Director 2014 [email protected]
ABC Operations Director 2016 [email protected]
ABC Head of Product 2017 [email protected]
XX XXXX
XX
20.6%
XX
2015 2016 2017
▪ 26 Jul 2018 – XXX approved on ABC: XXX has been
approved to supply their services– across multiple utilities
through the latest iteration of the UK government’s Crown
Commercial Services ‘RM3800 Utilities Management
Software, Metering and Ancillary Services Framework
Agreement
▪ 27 Nov 2017 – XXX at EMEX 2017: XXX participated in
EMEX 2017 (The Energy Management Exhibition) and
introduced XXX ID, an energy analytics platform
▪ 7 Aug 2017 – XXX opens new office: XXX opened a new
office in Blackpool, consisting of 40 employees
Name XXX DoI 1981 Employees 135 Address Sentinel House, XXX Website www.XXX.com
Sources: XXX Company Website, Secondary Research, RocSearch Analysis
© 2018 RocSearch. All Rights Reserved. 24
XXX: Bolt-On Opportunities UK Energy Management Systems Market Study
Sources: Resource Data Management Group Website, Bolt-On Company Websites, RocSearch Analysis, Proprietary Databases
Bolt-On Opportunities for XXX Across Various Growth Strategies
PRODUCT DEVELOPMENT
Note 1: Existing Markets of XXX: Construction and Building, Education, Healthcare, RetailNote 2: Existing Product/ Services of XXX: Alarm Monitoring, Bill Validation, Building Performance Monitoring and Control, Carbon Management, Energy Analysis and Dashboarding, Energy Optimisation, Maintenance and Support Services, Outage
Management, Predictive Maintenance, Refrigeration Monitoring and Reporting, Risk Management
Note 3: The above mapping of the bolt-on company’s products/ services and end markets is based on a subjective assessment of the platform company and bolt-on company’s offerings and end markets
NEW
PRODUCT
NEW
MARKET
Bolt-On Target Legend:
Target NameTarget Revenue | Target EBITDA
Company x
£6.7mn | £0.1mn
Company x
£28.5mn | £0.01mn
Company x
£33.1mn | £0.6mn
Company x
£4.2mn | £0.2mn
Company x
£6.8mn | £0.01mn
MARKET DEVELOPMENT
Company x
£1.5mn | £0.5mn
Company x
£1.3mn | £0.5mn
Company x
£1.8mn | £0.04mn
MARKET PENETRATION
Company x
£3.8mn | £0.7mn
Company x
£12.6mn | £0.4mn
Company x
£7.5mn | £0.7mn
DIVERSIFICATION
Company x
Company x
£5.7mn | £0.2mn
Company x £9.4mn | £0.4mn
Company x
£15.6mn | £0.7mn
Company x
£8.1mn | £0.6mn
£3.2mn | £0.2mn
Company x
£4.1mn | £0.3mn
Company x
£2.3mn | £0.2mn
Company x
£2.2mn | £0.8mn
Company x
£0.5mn | £0.3mn
Energen Ltd.
£0.1mn | NA
Company x
£1.1mn | £0.4mn
Company x
£0.2mn | NA
Company x
£3.1mn | £0.4mn
EXISTING
PRODUCT
EXISTING
MARKET
© 2018 RocSearch. All Rights Reserved.
Table of Contents
▪ Executive Summary 02-07
▪ Market Definition and Value Chain 08-10
▪ Market Size and Growth Outlook 11-13
▪ Growth Drivers and Inhibitors 14-16
▪ Market Trends and Their Impact 17-20
▪ Key Energy Regulations 21-23
▪ Competitive Landscape 24-31
▪ Mergers and Acquisitions 32-37
▪ Investment-worthy Opportunities 38-53
▪ Appendix 54-60
© 2018 RocSearch. All Rights Reserved. 26
Appendix – Expert Details and Interview Excerpts (1/5) UK Energy Management Systems Market Study
Participant Designation Organisation Quotes
Participant 1 Manager - Operations ABC
▪ Inhibitors – “Data Security challenges; General Data Protection Regulation (GDPR) has a major role to play”
▪ Market Overview – “Services should have higher potential to grow, especially the managed services. Managed services should have a higher percentage
share in future due to adoption of cost-saving mechanisms by the companies”
▪ Deployment Model – “Currently on-premise is getting adopted more often, so should be having the largest market size; in future, cloud should have higher
deployment”
Participant 2Manager – Business
DevelopmentABC
▪ Inhibitors – “Lack of integration with legacy infrastructures” and “Data Security concerns, especially in the machine-to-machine (M2M) ecosystem”
▪ Growth Rate – “CAGR should be in the range of XX%”
▪ Deployment Model – “On-premise -largest market size, cloud- higher deployment and On-premise should have 60-65% of share”
Participant 3 Director ABC
▪ Growth Rate – “CAGR should be more than XX%”
▪ Growth Driver – “Regulation and polices towards EMS in Europe, such as directives of the European Parliament, set the minimum energy performance
requirements of new and existing buildings, mandate the requirements of energy performance certification, and inspection of medium- and large-sized heating
and air-conditioning systems at regular intervals”
▪ Industry Vertical – “Power & Energy, Office & Commercial Buildings verticals have more than XX% market share”
Participant 4 C-Level Executive ABC
▪ Market Size – “The UK’s market size is likely to be between USD XX and XX billion in the current scenario”
▪ Inhibitors – “EMS technology requires huge initial investments to set up the field-level devices, replace aging infrastructure, arrange for transmission network
between the customers, and manage integration of new and existing systems on-site. Such high investments could lead to an additional economic burden on
the local and national government bodies. High operational and maintenance costs following the deployment are also a huge concern for the utility providers”
▪ Industry Vertical – “Market should witness more activity in Power & Energy, Office & Commercial Buildings verticals for the next five years”
1 2 3 4 5
© 2018 RocSearch. All Rights Reserved. 27
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