The growth of cleantech M&A and IPOs

Over the last few years, cleantech venture capital investing has grown remarkably from a niche category in 2004—when it only accounted for a few percent of invested money—to become a dominant theme in 2009, taking more than a fifth of investment.

This remarkable rise hasn’t been matched by activity in the IPO and M&A markets, however.

This shouldn’t really be surprising, since a newly developing industry will take longer to have a significant body of companies ready to make an impact on these markets. But where does cleantech currently figure in the overall M&A and IPO markets?

The two charts below give a good indication of the absolute share, which is about 5-6 percent for both IPOs and M&As. These also clearly highlight the growth trajectory, which is easy to ignore given that there has been very little absolute growth in cleantech IPOs and M&A activity over the last few years.

By comparing these with the venture chart, it could be argued that the M&A and IPO markets are about 5 years behind the venture market for take-up of clean technology.

This is probably too simplistic, however, since these markets are less concerned with newly developing industries than venture capital is, so are unlikely to embrace cleantech at the same rate.

Activity in the M&A and IPO markets is more aligned to the general make-up of companies in general,  so only once clean technology companies have grown to be dominant among the largest corporations globally will they begin to take an overall share comparable with the 20 percent currently seen in venture capital. Despite the rapid take-up of cleantech, this is still some way off.

So while there is little doubt in my mind that cleantech will grow its share of these markets over the coming years, it will likely do so at a slower rate than we have seen in venture capital. While it took VC 5 years to go from 5 to 20 percent, it may take 10 years for this share to be attained in the M&A and IPO markets.

The data and analysis here is based on sections of the Cleantech Group's recently published 4Q09 / FY 2009 Cleantech Investment Monitor. The full report—which contains 76 pages of data, trends and takeaways from the past full year of cleantech investing—is available for clients to download here.