With just $7.3 million of disclosed venture investment, Retroficiency likely pleased its investors when it was acquired last week, six years after its founding. The deal was also a boon to the acquirer, Ecova, which counts M&A as a key component of its growth strategy. The company has made acquisitions in six of the last eight years.
FIGURE: Acquisitions of Ecova (formerly Advantage IQ), 2008-present
The deals illustrate Ecova’s evolution from a utility expense management business to a provider of energy procurement services and energy management solutions that extend to the level of individual building systems. The company also offers sustainability and waste solutions in addition to program management for utilities seeking to implement demand-side management programs.
The Retroficiency acquisition is Ecova’s first since the company itself was bought for $335 million by a subsidiary of multinational energy company Engie in 2014. Engie’s global footprint and financial resources (the company’s 2014 revenue was greater than $80 billion) provide Ecova with a strong platform for growth, which will similarly benefit Retroficiency as it scales. The new acquiree has also pointed to Ecova’s 700,000 corporate sites under management as a significant opportunity, and Ecova’s extensive client-facing team is a significant asset for a startup with less than 50 employees.
In return, Retroficiency expands Ecova’s C&I energy management solutions to include cloud-based software for virtual energy assessments, streamlined on-site audits and ongoing M&V. These capabilities keep Ecova’s offering competitive as it vies for contracts against EnerNOC, Johnson Controls, Schneider Electric and others. EnerNOC, through its recent acquisition of Pulse Energy, is particularly well-positioned to compete with Ecova across a spectrum of commercial energy management offerings delivered directly to customers and indirectly through utilities, along with accompanying customer segmentation and M&V software.
But acquisition isn’t the only option for C&I-focused energy solutions providers. Vendors Schneider Electric and CPower have taken an active approach to partnerships, and Ecova and EnerNOC have similarly used partnerships to supplement acquisitions. Retail electricity providers are drawing from the same pool of partners to boost commercial customer retention and generate new revenue streams.
FIGURE: Partnerships Between Incumbent Energy Solutions Providers and Emerging BEMS Vendors
Source: GTM Research
None of the companies displayed compete directly with every company above and below them. Still, the visual makes clear that established providers are relying on emerging technologies to stay competitive in the building energy management space. These emerging technologies generally exhibit a capability for granular energy monitoring coupled with cloud-based data analytics and strong algorithms for M&V.
Who hasn’t yet paired up? On the BEMS side, FirstFuel and Gridium are notably absent. On the incumbent solutions provider side, Ameresco and Honeywell are two major players missing from the picture, though the pending acquisition of Elster will give Honeywell a strong commercial energy management software offering.
Commercial customers have seen energy evolve from a simple expense to a cost-cutting opportunity, and are seeing it further evolve into a revenue-generating opportunity as they become active participants in utility programs. Recent activity in the commercial energy management space indicates that leading vendors must provide a spectrum of offerings to address these opportunities, including procurement, remote audits, recommendations for specific technology upgrades, M&V of energy savings, demand-response participation and more.
Many vendors are pursuing these capabilities through acquisitions and partnerships. Others are going it alone.
Andrew Mulherkar is a GTM Research analyst and author of reports on Grid Edge Mergers & Acquisitions and Grid Edge Partnerships.