COVID-19 – M&A and fund raising impact across the Sustainability sector

Category: Company Update

We have a broad perspective on developments in the market and thought it timely to make a number of brief observations on what we are presently seeing. Our current mandates include carbon capture and fuel cell technology companies, energy efficiency software, EV charging and battery storage infrastructure.

• Our general experience in the Sustainability market is that business continues and, while it has not been immune to the broader economic impacts of COVID-19, the forces driving the sector are much longer term
• Infrastructure investors by and large remain open for business and, though there may be fires to fight in some portfolios (notably around transport assets), renewable generation growth and the grid stability issues that flow from it are clear long term trends and COVID-19 does not change that
• We have seen similar arguments apply in relation to cleantech where the desire to invest is often underpinned by ESG considerations for larger corporates, and valuations are a function of future market demand and profitability rather than today’s EBITDA.  Quality opportunities remain scarce and strategic appetite continues to be strong
• Perhaps the main area where we have seen some softness is in more mature services businesses.  For those, where the buyer universe is more skewed towards private equity and valuations are a function of EBITDA, not surprisingly we have seen several sellers hit the ‘pause button’ although, with underlying trends still strong, this is mainly a matter of timing
• Liquidity issues are less prevalent than in other sectors, but we are seeing some challenges in particular where companies need additional capital from a new provider but existing capital structures make securing such capital complex
• This experience is broadly mirrored across the Sustainability sector teams within partner firms in our international network Mergers Alliance

Opus has a strong track record advising in all these situations and a highly experienced team who have worked through a number of cycles and downturns and can add value through helping interpret and navigate difficult public and private markets.  Please do make contact if you believe we may be able to help.