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M&A Activity in the UK Energy Services Market Tops £600m as Inspired Energy Gobbles up STC Energy

Yet another UK energy services firms was snapped up this week as energy procurement consulting firm Inspired Energy continued along the acquisition trail with the purchase of STC Energy and Carbon Holdings (STC) for £9m. STC, based in Kent in the UK, is an energy procurement and bill validation consultancy. STC generated revenues of £4.2m in 2014, up 35% from a year previous and had EBITDA of £1.7m. This translates to an EBITDA multiple of 5.3 for the deal.

This is the latest in a series of acquisitions made by the £11m Inspired Energy. In March 2014, the Lancashire headquartered firm bought up Simply Business Energy and KWH Consulting – both firms are energy procurement specialists in the small and medium sized enterprise (SME) segments. In July 2015, Inspired Energy bought out a rival energy procurement consulting firm, Wholesale Power UK, for £2.75m.

Inspired Energy is by no means the only firm making acquisitions in the UK energy services market. Over the last year there have been in excess of 10 major M&A deals. This has included major acquisitions by SSE (ESG), Npower (RUMM), Utilitywise (T-mac) and Accenture (EnergyQuote JHA). We estimate that £500-£600 million has been spent on UK energy services deals in the past three years.  

What is fuelling such a flurry in M&A activity? One major factor is the lack of growth in the UK energy services market. Our recent study showed the market as a whole will grow at a disappointing CAGR of 4% over the next five years. Within this, energy procurement consulting is one of the more mature segments of the market. There is a high level of customer penetration and multiple suppliers so the trend for acquisitions-led growth strategies makes a lot of sense. Added to this, our 2015 global survey indicates a growing number of corporates are looking for a provider who can deliver all of their energy management needs, avoiding the need to contract with a series of different point solution providers. This is driving firms to develop broad based energy solutions and plug gaps in their offerings. 

Will this M&A activity continue into 2016? Who are the mostly likely targets and will these acquisitions deliver success? To hear more on this and the outlook for the UK energy services market, tune into our webinar next month.