Energy Industry Leaders Increasingly Repositioning Holdings to Align with Rapid Development of Renewables, Efficiency, and Decarbonization Initiatives
Capstone Partners spots trend of businesses streamlining holdings and shedding non-core assets to prioritize sustainability with recent divestitures by National Grid
Chicago, IL – Capstone Partners, a leading middle market investment banking firm, is witnessing a shift in focus among energy companies and an increase in investments that better align these organizations with rapidly evolving trends in energy efficiency, renewables, and sustainability. As these priorities take hold, companies are carving out non-core operations in favor of investments supporting their strategic priorities—a trend highlighted by the recent divestitures by leading investor-owned utilities such as National Grid.
“We have experienced a significant increase in M&A activity in the energy sector supporting companies that look to reposition themselves for the future,” said Ted Polk, Managing Director and Co-Head of the Industrials Investment Banking Group at Capstone Partners. “National Grid’s recent sale of National Grid Energy Management (NGEM) to Radius Mechanical—and the sale of other non-core assets in recent years—is a prime example of this trend.”
Energy costs constitute the third largest expense for small businesses—behind labor and real estate—generating consistent and significant expenditures. Notwithstanding the concurrent mounting pressure to adopt renewable energy solutions driven by environmental concerns, customers continue to demand cost-effective energy efficiency from their utility providers. As economical renewable solutions are increasingly sought after, providers are motivated to invest heavily in power-generating solutions that cost-effectively meet energy demand to ensure customer satisfaction. Capstone anticipates this dual requirement to continue as a long-term priority for businesses operating in the space.
National Grid, a prominent global player in the Energy industry, has pursued a multi-carve out M&A strategy, divesting a number of its non-core assets in recent years to help meet growing demand for its transformative sustainability initiatives. Capstone recently advised on its third transaction with National Grid as part of this ongoing initiative, completing the divesture of National Grid Energy Management (NGEM) to Radius Mechanical.
“The sale of NGEM is another strategic move by National Grid to focus on its core businesses,” continued Polk. “The company is now better positioned to benefit from its increased focus on its other energy efficiency and sustainability solutions.”
NGEM provides commercial energy services, partnering with businesses and municipalities to repair, maintain, and operate their energy plants. The company notably supports public housing in New York City and delivers critical repair and maintenance services to the New York City Housing Authority (NYCHA).
As discussed in Capstone’s latest HVACR Services Market Update, the noncyclical nature of demand for energy services paired with high revenue visibility due to the recurring nature of its long-term contracts make companies like NGEM highly attractive in the M&A market, particularly in the face of prevailing economic uncertainty—and made the transaction mutually beneficial for National Grid, NGEM, and Radius Mechanical.
The industry shift toward sustainability and energy efficiency is further underscored by the acquisitions of Commonwealth Electrical Technologies and Taylor Consulting and Contracting—firms specialized in supporting renewable energy programs and energy management initiatives. Robust acquirer demand for such companies signals the consistent and growing need within the energy sector for solutions that reduce costs and environmental impact as the transition to clean energy accelerates.
Read more about the divestiture of NGEM here.
ABOUT NATIONAL GRID
National Grid is one of the largest investor-owned energy companies in the world, serving over 20 million people through its networks in the U.K. and U.S. The company operates across electricity and natural gas industries, focusing on transmission and distribution activities.
ABOUT NATIONAL GRID ENERGY MANAGEMENT (NGEM)
National Grid Energy Management is a commercial energy service company that partners with businesses and municipalities to repair, maintain, and operate their energy plants. NGEM successfully operates and maintains heating and power plant facilities within the NY Metropolitan area under long-term contracts and agreements, and its client list features a number of Fortune 500 companies.
ABOUT CAPSTONE PARTNERS
For over 20 years, the firm has been a trusted advisor to leading middle market companies, offering a fully integrated range of investment banking and financial advisory services uniquely tailored to help owners, investors, and creditors through each stage of the company’s lifecycle. Capstone’s services include M&A advisory, debt and equity placement, corporate restructuring, special situations, valuation and fairness opinions, and financial advisory services. Headquartered in Boston, the firm has 175+ professionals across the U.S. With 12 dedicated industry groups, Capstone delivers sector-specific expertise through large, cross-functional teams. Capstone is a subsidiary of Huntington Bancshares Incorporated (NASDAQ: HBAN). For more information, visit www.capstonepartners.com.
FOR MORE INFORMATION CONTACT:
Ted Polk
Managing Director
C0-Head of Industrials Investment Banking Group
708-921-8961
tpolk@capstonepartners.com
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