Analysts: World Energy, buyer stand to gain in merger
With EnerNOC poised to acquire World Energy Solutions early next year, energy industry analysts foresee increased sales opportunities as the two companies come together and each gains access to a wider group of clients and a deeper breadth of offerings.
“I see it as a great fit. We think it's a very creative acquirement for EnerNOC,” said Carlos Newall, who covers the energy industry for Raymond James. “It expands their customer base. We thought it was a great acquisition in the sense that the World Energy model fits well into EnerNOC's.”
Boston-based EnerNOC is an energy intelligence software firm that provides cloud-based energy intelligence software (EIS). The company provides services ranging from energy analytics, energy efficiency programs, emissions tracking and energy procurement. It recently announced it will pay $76 million to buy Worcester's World Energy Solutions. The deal is expected to be completed by Jan. 5, according to EnerNOC's SEC filings.
The deal will help EnerNOC's customers buy energy through software that streamlines the negotiation process toward the purchase or sale of electricity, natural gas and other energy resources. World Energy has brokered more than $45 billion in electricity, natural gas and environmental commodities transactions for its U.S. customers, the company says.
“World Energy Solutions will round out our existing software platform in the area of supply management, helping customers buy energy better with an online auction platform and enhanced functionality around contract management, position reporting and learning,” Timothy Healy, EnerNOC co-founder, executive chairman and CEO, said in a conference call discussing the company's third-quarter earnings. “We see a strong fit between World Energy's software and our EIS platform, and we look forward to delivering additional value to our customers as a result of this transaction.”
World Energy's software is used by more than 4,000 customers and will help drive EnerNOC's recurring software revenue, while offering opportunity for cross-sales of EnerNOC's services, according to a financial note prepared by Tyler Frank and Ben Kallo of Baird Equity Research, a Milwaukee-based business analysis firm.
EnerNOC sees that opportunity, Healy explained in the call.
Little overlap in customer bases
“One of the nice things that we've seen in doing an initial set of homework is not a tremendous amount of overlap with those customers. A lot of these customers are new,” he said of World Energy's clients. “It was actually pretty difficult to find a common customer, which I think is one of the most attractive things of doing this acquisition, because that's going to afford us tremendous amount of cross-selling opportunities to one another's customer base.”
Through the acquisition, EnerNOC can tap into a growing market of software as a service and specifically power purchasing through the use of software, Newell said.
“The need for (power purchasing) is increasing as we use more and more power; there is a need for energy management,” he said. “The service is targeting customer needs.”
Although the acquisition strengthens both companies' positions, there is still room within the energy acquisition market for firms that specialize in it without providing a broader base of services, said Newell. These companies can survive on their own, although there are not many examples of them, he said.
One major question that will remain unanswered until the acquisition is complete is what will happen to World Energy's employee base of more than 100, with 60 of them in Worcester. EnerNOC employs close to 700 full-time employees in the United States, most of them in New England. Both companies have declined to comment on what would happen to the employees after the merger.
As for the future of the downtown Worcester office, “that varies from transaction to transaction. It is never consistent,” Newell said.
During EnerNOC's earnings call, Healy said no decision has been made on how the deal would impact the offices in Boston and Worcester.
“It's very premature to suggest that we have to spend a lot of time thinking about redundancies when, in fact, what we see is a tremendous growth opportunity here to take advantage of the assets of both companies,” he said, “including the significant assets and the people at World Energy that we're excited to welcome to our team.”
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