NorthEdge sells stake in Utiligroup to ESG in £100m deal

NorthEdge Capital has sold Chorley-based energy technology provider Utiligroup to Energy Services Group (ESG), a provider of technology solutions to the retail energy and utility industries, for about £100m.

Founded in 1997, Utiligroup is a provider of innovative Software-as-a-Service (SaaS) solutions to the utilities and energy industries and has been the pioneer in delivering Energy2.0, the emergence of the independent energy market and the analogue to digital smart meter revolution.

Accounts for Utiligroup show the company made a near-£1m loss in the year to March 31, 2015, but broke even 12 months later.

Utiligroup will join ESG, an Accel-KKR portfolio company, to support the company’s global growth strategy, providing a footprint in the European market.

ESG has recently expanded its presence beyond the US by entering Japan and Canada and is targeting further expansion into other geographies.

The combination of Utiligroup and ESG will expand the company’s global customer footprint and accelerate its product innovation roadmap.

NorthEdge initially backed Utiligroup in a management buyout in June, 2014. The investment strategy was to strengthen the management team to enable them the bandwidth to capitalise on the growth in the independent energy supply sector.

Funding was also provided to aid the development of new smart meter connectivity software, in advance of the launch of the smart meters to consumers from Summer 2017.

The original three directors, Matthew Hirst (CEO), Andrew Green (CTO) and Steve Gosling (CFO), that NorthEdge backed were strengthened by the recruitment of a further five main board directors.

NorthEdge also introduced Ian Kelly to the business as non-executive chairman, who had been backed previously as CEO on two other successful investments.

Over the investment period, Utiligroup has seen rapid growth with turnover increasing by over 200 per cent. The company now employs over 220 staff and provides services to more than 40 UK energy suppliers.

The deal is the fifth exit from NorthEdge’s maiden £225m Fund I and has generated a gross 5.7x return on investment. NorthEdge is reinvesting alongside Accel-KKR as part of the deal given the exciting growth opportunities that remain in the sector.

Matthew Hirst, chief executive at Utiligroup, said: “NorthEdge has supported us through a period of rapid expansion and the team’s continued support and experience has been invaluable to the business.

“We have now established ourselves as a true leader in the market, helping a growing range of diverse energy and utility companies to operate more efficiently through a combination of automated software, managed services and analytics.

“The latest acquisition provides a huge opportunity for Utiligroup to be recognised on a global stage and we’re excited about the next phase of growth with Accel-KKR and ESG.”

Jon Pickering, head of Manchester at NorthEdge Capital, added: “The management team has performed exceptionally well during a time of significant change in the energy market. Consumer buying habits and changing regulations have seen new players enter the market, taking share away from the big six energy suppliers.

“The team have also capitalised on the opportunity to develop and then successfully launch smart grid software alongside extensive data analytics for existing and new customers.

“This has provided a number of further growth opportunities for Utiligroup in the UK, and the sale to Accel-KKR means the company is now in a strong position to expand internationally.”

Phil Galati, chief executive of ESG, added: “We are very excited to join forces with Utiligroup.  Together we are committed to making our clients successful in expanding energy choice and enabling consumers and businesses around the world to have greater control of their energy consumption.

“Matt and the team at Utiligroup have built a great business and we look forward to working with them to continue to deliver innovative solutions to the marketplace.”

Jonathan Boyers, head of deal advisory in the North of England at KPMG, added: “This is a landmark transaction. It highlights the transformative role that technology is playing to disrupt the UK utility and energy markets, but also the growing global interest to invest in those behind the digitization of services.

“Utiligroup’s growth since its buyout in 2014 and influence on the energy industry make this one of the stand-out success stories of the North West business community in recent years.”

KPMG (Jonathan Boyers and Rick Stark) provided corporate finance advice, DWF (Jonathan Robinson and Vicky Ross) provided legal advice and EY (Neil Hutt, Stuart Thwaites and Steven Kingham) undertook financial due diligence for the company. Management corporate finance advice was provided by KPMG (Alex Hartley and Steven Leah), legal advice by Fieldfisher (Matt Fleetwood and Joanne White) and tax by PwC (Dan Harris and Catherine Kay).

Results International served as Accel-KKR’s financial advisor for this transaction. Brodies and Kirkland & Ellis represented Accel-KKR as legal advisers.