Tuesday, April 26, 2005

Beacon Power buys NxtPhase

The announcement was made yesterday that Beacon Power will be acquiring NxtPhase for something around $15M. It's unclear exactly how the companies' technologies and products will fit together (NxtPhase focuses on high-voltage monitoring applications, while Beacon Power has flywheels and inverters), but both sides say this prepares them to better serve the needs of the electrical grid.

While this particular transaction hasn't necessarily been the most lucrative for NxtPhase's prior investors (judging from the press releases listed on their website, the company raised more than $40M since 1999), it's worth noting that according to the recent "exit returns" study released by the Cleantech Venture Network (as previously described here -- scroll down a bit to find it) the average return to cleantech venture investors found via M&A exits was about 4.1x over the past ten years.

This is an important and encouraging finding, because in clean technology markets it's probably relatively more likely for venture investments to exit via trade sale than other paths (e.g., IPO). The reasons are largely positive:
  • Large acquisitive players with stated strategic goals to pursue some of these markets (for example, GE with clean water and clean energy technologies),
  • The value of a bundled technologies sale to large, key customers such as utilities,
  • The fact that many of these technologies are taking over for older incumbent technologies rather than building entirely new markets,
  • ...to name a few
The study tracked about 400 such transactions over the most recent five-year period, 1999-2003, so the volume is there....


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