RENEWABLOG

Cleantech to Follow Tech? M&A & IPOs in 2009

Scott Kirsner recaps an interesting post about the M&A climate at the end of 2008 in traditional technology and how the softening economy hasn't necessarily killed M&A activity. In it, a Boston-based VC talks about how 2008 saw some relatively major acquisitions in lieu of companies testing a frigid IPO market.

Unlike traditional technology sectors, Cleantech is one area that seemed immune to the cooling of the IPO market during 2008 (specifically, solar companies). There were a number of companies rumored to be filing for an IPO, some who went public and still others getting hundreds-of-millions of dollars in valuation. Now cleantech seems to be cooling too (or at least the success rate is dwindling) and there have been several acquisitions (Schneider Electric acquiring Xantrex is one). So is green like tech after all and the IPO desert is upon us?

Not really. Most say that the cooling of the IPO market for cleantech has more to do with the expiring ITCs, an aversion to investment risk and lack of action at the federal level. I spoke to a VC at the recent PVSEC conference and he said that "every major solar integrator on the west coast was on the chopping block" due to the uncertainty of tax credits. Hyperbole? Maybe.

More likely, opportunists are trying to drive down valuations and acquisition prices by playing on the ITC fears. Our government relations team which follows the regulatory market believes that the cooling of cleantech IPOs is more of a delay in the inevitable than a long-term trend. The fact of the matter is that the federal political climate will warm significantly in February when a new administration is entrenched. Both McCain and Obama promise to be friendlier to cleantech companies than the current administration boosted by, in all estimates by political pundits, larger Democratic majorities in the House and Senate. Cleantech companies just need to resist the M&A urge and hold out for a couple of quarters.

Expect more action at the federal level in 2009, bolstered by more legislation and regulation to drive forced adoption of renewables at the state and local levels. This will reenergize the IPO market for cleantech companies and push even more VC investment. Solar will continue to be the major public-market focus during the first half of 2009, before wind, biofuels and others catch up.

The public market darkhorse? Energy storage which many VCs and entrepreneurs say is the bottleneck in green efficiency and adoption.

And if the climate doesn't warm at the federal level in 2009? Expect that many regions of the country will fill the void with state and local legislation and tax incentives. This includes New England, the mid-Atlantic, Southwest and California. These measures will still give the market enough fuel to support a number of successful companies and prevent any M&A firesale.

Quick Note: We'll be hosting a webinar on the intersection of public relations and government relations for green and cleantech companies on Wednesday, November 12, 2008. You can register here.

Posted by Jason Morris on September 10, 2008 at 5:59 PM
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