Demand-response company Comverge announced Monday it has bought energy-efficiency firm Public Energy Solutions for $13.4 million in cash, stock and convertible notes.
In recent trading, Comverge (NASD: COMV) shares were up 1.89 percent to $33.48 on the news.
The acquisition of Public Energy Solutions, which sells products and services to help utilities conserve energy, is the latest in a buying spree in the energy-management sector.
Demand-response company EnerNOC (NASD: ENOC) acquired MDEnergy for $7.9 million in September, after buying Celerity Energy Partners and eBidenergy last year. In July, Comverge bought Enerwise Global Technologies for $75.7 million after Enerwise acquired Clean Power Markets last year.
"We are going to see a rapid consolidation across the demand-response industry," said Neal Dikeman, a partner with Jane Capital Partners. "It's a cutthroat industry and they're in a land-grab phase."
Demand-response technologies help utilities to avoid blackouts by paying customers to use less power when the electric grid is strained. Interest in the technologies is growing strong, as underlined by a $17-million venture-capital round for demand-response startup ConsumerPowerline last week (see In Brief: FPL and PG&E Back Solar-Thermal, 212 Gets $250M).
But so far, there has been "no real differentiation" between the products, Dikeman said.
While companies all have a different flavor - some have slightly better technology platforms, provide different qualities of service or target somewhat different markets - they still deliver pretty much the same thing, he said.
"It's very different to say, 'My product is fundamentally different from what they're doing,'" he said. "Instead, they have to say, 'Here are eight reasons we're better, and we're nice guys and we'll cut you a good price.'"
Every deal has several demand-response companies chasing after it, so it's almost cheaper to buy out a potential competitor than to fight it out with them, he said.
And growing larger makes sense because larger companies will get an edge in the form of more buying clout and better marketing platforms, he said.
"We will probably end up seeing a consolidation over the next two or three years," he said. "I'm not saying a smaller entrant or new guys wouldn't be able to make it through that, but I definitely don't see the consolidation stopping."
Demand-response isn't the only sector seeing a consolidation, of course.
Wind-industry acquisitions have become commonplace and the solar industry also has been seeing buyouts, perhaps most notably solar-manufacturer SunPower's acquisition of solar-integrator PowerLight in November.
Other examples? In July, solar-cell maker E-Ton Solar bought Adema Technologies, which makes silicon ingots and wafers. In June, investment-management firm Sierra Nevada Partners bought solar-integrator HelioPower and trading company Itochu Corp. bought solar-distributor Solar Depot.
And last year, China's Suntech Power bought Japanese solar company MSK, SunEdison bought solar integrator Team Solar and SolarCity bought Declination Solar and Palo Alto Solar. (For more on integration, see Solar Companies Debate Doing Everything).
We asked several companies for their thoughts on this trend:
Thomas Werner, CEO of SunPower Corp. (NASD: SPWR):
"There are a hell of a lot of people making solar. This will be rationalized in all likelihood. Scale will matter. The interesting thing is it's not clear who and what will rationalize."
Steve Hill, president of Kyocera Solar (NYSE: KYO):
"It's simply a matter of time before it's going to happen. You have all these new entrants. Are they willing to maintain the same level of quality as the incumbents? If quality drops, it could hurt the whole industry."
Zhengrong Shi, CEO of Suntech Power (NYSE: STP):
"Consolidation will happen with time and [the] quality issue will become more important. The quality issue and the cost issue and continued technology innovation - put all those together and there will be some [mergers and acquisitions] in the future."
- Reporter Rachel Barron contributed to this story.