Daniel Englander

The First $1 Billion Solar M&A June 2, 2008 at 11:09 AM

Germany’s Bosch, the world’s largest automotive components supplier, has acquired 50.45 percent of ersol solar for $1.67 billion. The acquisition comes at a 63 percent premium on ersol’s Friday closing share price at an increase of 21.4 percent of ersol’s projected 2009 EPS. This is the largest pure play solar acquisition in the industry’s history, trumping previous deals like First Solar’s $34 million acquisition of Turner Renewables or SunPower’s $332 million acquisition of PowerLight.

The ersol acquisition is the first of what many have hoped is the beginning of convergence and consolidation in the solar industry. With over 150 solar startups funded within the last four years - 75 percent of which have the words “sun” or “sol” in their name - more than a few VC’s have started to get a little nervous about potential exit strategies. The exits that do occur are more likely to come from acquisitions than from IPOs - it may never be possible to raise the capital necessary to overcome scale and commercialization costs. Of those, the trend of companies getting bought out by non-greentech industrials should continue. This may also be buoyed by vertical integration moves undertaken by large firms - Applied Materials is a good example of this. Q-Cells is as well, but to a lesser extent.

Regardless of the trends, the ersol acquisition is big news. Over the last five years slightly more than 20 specifically venture-backed companies have been acquired, with average deal size of close to $31 million. This is less than stellar. As big industrials move into this space and begin buying up solar companies - specifically components manufactuers - like so many modem and switch makers during the late 1990s - we may begin to see a shift in the kinds of companies coming into the market. Remember, VCs are malleable when they’re not stubborn or quiet. However, the opening ersol has created in the M&A market for pure-play solar companies may provide some light at the end of the tunnel. Hartmut Moers, an analyst at Oppenheim said, “there is speculation that we might see similar bids.”

To hear more about this, come check out my talk tomorrow at the Boston Cleantech 2008 Summit.

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