Pitch Best MidCap Deal 2022: APG and Omers – Groendus

Name of the deal: APG and Omers Infrastructure acquire Groendus from NPM Capital 
Date announced: 17 May 2022 
Date closed: Expected beginning of November 2022 
Published value: not public, +/- 250 million euros 
Buyer(s): APG and Omers Infrastructure 
Target: Groendus 
Seller: NPM Capital 

Involved firms and advisors 

Involved firms and advisors buy side:  
Voltiq and Rothschild & Co. (M&A Advisory), EY (Tax Advisory), Loyens & Loeff and Latham & Watkins (Legal Advisory Corporate M&A), PwC and Strategy& (Consultancy) 

Involved firms and advisors target:  
AXECO (M&A Advisory), PwC (Tax Advisory), NautaDutilh (Tax Advisory and Legal Advisory Corporate M&A) 

Involved firms and advisors sell side:  
AXECO (M&A Advisory), PwC (Tax Advisory), NautaDutilh (Tax Advisory and Legal Advisory Corporate M&A) 

Pitch    

Brief description deal / Deal outline  
In May 2022, NPM Capital reached agreement with a consortium consisting of APG Infra and OMERS Infrastructure on the sale of Groendus.  
Groendus is one of the larger sustainable energy transition platforms in the Netherlands, and was established in 2021 through the merger of six companies in the rooftop solar, smart metering and energy efficiency and management services spaces.  Through this transaction, long term pension investors APG and OMERS are proactively and locally investing in the Dutch energy transition. 

Why should this deal win the Award for Best Mid-Cap Deal 2022?  
This transaction (i) is unique as pension investors are proactively investing from their infrastructure funds to build a large, driving platform in the energy transition in the Netherlands, (ii) is relevant in a societal/environmental context as it sits at the heart of the energy transition and the impact of the ongoing energy crisis, (iii) sets up Groendus for the future with a long-term focused and financially strong shareholder base, and (iv) marks an attractive exit for NPM Capital.  

Unique transaction: rare opportunity for long-term, pension investors to back the energy transition  
APG, through its Infrastructure fund, and OMERS Infrastructure invest on behalf of respectively pension fund ABP, the Dutch pension fund for the government and education sectors, and OMERS, one of Canada’s largest pension plans. This transaction is a rare opportunity to invest in the acceleration of the (Dutch) energy transition with a view to substantially increasing Groendus’ scale in a short timeframe and building a driving platform in the energy transition. This is exemplified by the fact that the current/initial deal size is (by far too) small for APG’s and OMERS’ typical minority/ joint venture infrastructure investments – they are both fully focused on add-on investments to put additional capital to work and realise Groendus’ goals. In addition, this investment also benefits participants in the pension funds through a societally and environmentally relevant investment, and fullfills ABP’s wish to locally invest in The Netherlands in the energy transition and contribute to a better world.  

Relevant transaction to society: enabling acceleration of the energy transition in the current economic/energy climate 
While the energy transition was already a key (global) topic in creating a sustainable future, the relevance of the deal was further amplified during the process on the back of (i) the unparalleled increases in energy/gas prices as a result of among others developments in Ukraine/Russia and (ii) the subsequently announced plans by the European Commission to reduce European dependency on fossil fuels and accelerate roll-out of renewable energy sources, emphasizing the increased importance of solar (roof-based) energy solutions and smart solutions to e.g. optimize energy use/storage. Furthermore, through its integrated offering of solar/hardware/technology, Groendus is perfectly equipped to solve current issues such as grid congestion, energy management and efficiency, and renewable energy production. Given the strong increase in energy prices, the business case ‘to go green’ has also become significantly more attractive and is therefore expected to drive a strong increase in demand for Groendus’ solutions. This makes it all the more important that the company is optimally positioned to service (new) customers in their efforts to optimize their energy usage.  That is what this deal enables: it allows Groendus to deliver on its purpose to enable 100% clean energy for every organization and institution in the Netherlands with the backing of a reputable, knowledgeable and financially strong shareholder base. With the backing of the consortium, Groendus can further accelerate its efforts to continue building the energy transition service portfolios for its customers, both organically and through significant add-on acquisitions. 

For shareholders/sellers: a successful investment resulting in an attractive valuation/exit  
Starting in 2019, several companies active in sustainable energy were acquired by NPM with the goal of developing a combined green energy proposition. This group of companies was integrated in 2021 and continued under the name Groendus as of March 2021. With the backing of NPM Capital, Groendus has been set up as an integrated platform and significant growth in the customer base has been realized, providing a strong basis for future growth. This has also been recognized by APG and OMERS and has been reflected in a highly attractive valuation for NPM Capital after a holding period of just over 3 years.  

Deal rationale:  
Both APG and OMERS, as pension investors, focus on attractive, long-term, responsible investments in the infrastructure and renewable energy sector, combining solid returns with contributing to a rapid energy transition as well as realizing the UN Sustainable Development Goals. The acquisition of Groendus is a rare opportunity for both investors to make an investment at the core of their strategy and accelerate the energy transition.  

While the energy transition was already a key (global) topic in creating a sustainable future, the relevance of the deal was further amplified during the process on the back of (i) the unparalleled increases in energy/gas prices as a result of among others developments in Ukraine/Russia and (ii) the subsequently announced plans by the European Commission to reduce European dependency on fossil fuels and accelerate roll-out of renewable energy sources, emphasizing the increased importance of solar (roof-based) energy solutions and smart solutions to e.g. optimize energy use/storage.  

For OMERS, this investment marks the first infrastructure investment in the Netherlands. APG expands further its portfolio in line with its strategy to support innovative solutions for the energy transition on behalf of ABP. 

What is the impact of this deal for the company?  
This transaction optimally positions Groendus to deliver on its purpose to enable 100% clean energy for every organization and institution in the Netherlands with the backing of a reputable, knowledgeable and well-capitalised shareholder base.  

With the backing of the consortium, Groendus can further accelerate its efforts to continue building the energy transition service portfolios for its customers. This is exemplified by the fact that the current/initial deal size is small for APG’s and OMERS’ typical infrastructure investments – they are both fully focused on add-on investments to put additional capital to work and realise Groendus’ goals. 

What is the impact of this deal for the direct stakeholders?  
(Future) customers: customers will benefit from Groendus’ ability to further invest in its platform through green energy production, power storage and a sustainable energy grid. This will directly result in lower energy usage and consequently lower energy costs for customers, optimizing their business.  

Management & employees: management & employees are backed by long-term shareholders with the intention to make significant further investments in the business, driving for instance future growth and career opportunities.  

Society and environment: both society and the environment benefit from Groendus’ further increased efforts to increase the pace of the energy transition, resulting in lower energy usage and a better climate. 

What is the impact of this deal on society?  
Groendus makes a major contribution to the energy transition through its renewable energy assets, insights by smart metering data and with its unique peer-to-peer sustainable energy trading platform.  

Through the acquisition by APG and OMERS, Groendus is in a position to accelerate its efforts (e.g. by pursuing a buy-and-build strategy) and thereby contribute to solving pressing issues such as energy management (resulting in lower costs) and grid congestion. As set out, it also benefits the environment/climate by optimizing energy usage. 

What was most complex about this deal?  
The negotiations between parties took place in the context of highly volatile energy prices directly impacting the profitability of Groendus’ solar portfolio, as well as general volatile market conditions. This resulted in intensive discussions and negotiations between parties in the triangle APG – OMERS – NPM/Groendus, in order to bridge different valuation expectations and realise the deal certainty that NPM required. Also, APG and OMERS have formed a 50/50 JV for this transaction, which added additional complexity to the transaction and the negotiation process. In addition, a direct investment in a truly operational, entrepreneurial and fast growing company like Groendus is, is not a typical investment characteristic for the infrastructure teams of APG and Omers (who are more typically engaged in large, minority investment in a portfolio of core infra assets). This was all further amplified by the fact that NPM had only recently (March 2021) merged the businesses it had acquired with the view of further building out the platform; i.e. they would only exit at a very attractive, full valuation.  

Nonetheless, as a whole, NPM Capital also weighed and recognised the significant benefits for Groendus in continuing with APG and OMERS as long-term, financially strong shareholders. Against this backdrop, both sides were able to find solid compromises to realise this transaction.