Good morning, Hubsters. Senior reporter Michael Schoeck here with the US edition of the Wire from the New York newsroom. Happy New Year to all our readers!
Today we’ve got two original PE Hub stories for you.
The first is a 2025 Look Ahead piece on private equity investment activity in the renewable energy industry under the incoming administration.
In deal news, One Equity Partners is closing its late 2024 acquisition of EthosEnergy, an energy services provider.
And in the second original piece we’ll share an excerpt from John R Fischer’s story on pharmaceutical industry deal trends.
Let’s first sample a 2025 outlook for the renewable energy market.
Solar plus energy storage shine bright
Large demand for distributed generation power such as solar plus storage from Fortune 500 customers is expected to keep the pace of renewable energy development and private equity and infrastructure investments steady under the incoming Trump administration, an investor and banker told PE Hub.
After climate change and grid modernization legislation passed under the Biden administration such as the Inflation Reduction Act and Bipartisan Infrastructure Law, sources say it is difficult to see a second Trump administration or his regulatory appointees dismantling or dissecting the IRA or other laws.
“I think this industry is going to be flat in the coming years,” Ted Brandt, founder and CEO of investment bank Marathon Capital, told PE Hub. “Hyperscalers like Microsoft are voracious users of renewable energy, and the huge demand for solar, storage and onshore wind is going to continue unabated for a few more years.”
Brandt and Jake Erhard, a partner at energy PE firm ArcLight Capital Partners, spoke with PE Hub for this Look Ahead piece about the US energy transition under the incoming Trump administration. Below is an excerpt from the piece.
In one such deal, KKR and Energy Capital Partners anchored a record $50 billion partnership in October to meet the new power demand for data centers.
Looking ahead, Brandt said 2025 is likely to be a transitional year for the switch to renewable energy. Strategic-led M&A processes are likely to see pause until more clarity is known about federal tax incentives such as the Investment Tax Credit (ITC) or Production Tax Credit (PTC), two of the lifeblood tax incentives that have subsidized the renewable energy market for years.
But the project and portfolio market is expected to remain active in 2025 among renewable energy project developers, and PE and infrastructure investors.
Brandt said deals like these should prevail in 2025 and beyond, as pent-up private capital is seeking a home in long-life contracted clean energy assets.
Both Brandt and Erhard said consumer-facing renewable energy markets like residential solar could see material setbacks from potential tax cuts under the new administration. But commercial and utility-scale renewable energy developments and deal activity are largely to remain unhindered.
With Biden and Trump policies both favoring a ban on the import of solar panels and batteries from China, both sources said additional tariffs under Trump should only encourage investments in the onshoring of clean energy products in the US.
Both sources agreed that Trump’s team could remove new tax incentive adders from the IRA, or cause them to expire. With the current 30 percent cost rebate under the ITC, add-ons include sweeteners designed to increase the usage of domestically sourced content in project development, as well as to construct projects on Native American land, for example.
“We see it as more of a scalpel versus a sledgehammer to long-term incentives,” Erhard said.
Energy services
Keeping with the energy market, we have a deal to highlight involving One Equity Partners closing its late 2024 acquisition of EthosEnergy. The Houston-based target provides reciprocating turbine services to the power generation, energy, industrial, and aerospace and defense markets.
EthosEnergy was formed in 2014 as a joint venture between John Wood Group and Siemens Energy.
One Equity reached an agreement in August to acquire the gas turbine services business for undisclosed terms.
“EthosEnergy is uniquely positioned to meet the growing maintenance needs of an aging turbine fleet,” said Ante Kusurin, partner at One Equity in a statement.
The natural gas power market is an active user of turbine services such as EthosEnergy and many in the power industry see natural gas as an enabler of the energy transition. Natural gas and nuclear are seen as two favored power resources of the incoming Trump administration.
Pharma PE trends
Rising healthcare consumerization, self-care and cost-containment have opened new opportunities for private equity in pharma, along with large companies in the sector increasingly pursuing post-covid-19 M&A deals and an improved exit environment.
PE Hub broke down three trends driving PE-backed deals in the sector. Here is an excerpt from John R Fischer’s report on pharma deal activity:
More specialty drugs
Aging populations with more chronic diseases are demanding personalized care, including specialty medications for oncology and rare diseases.
A December deal showing the trend involved Silver Investment Partners portfolio company GPW Group acquiring Orly Pharma, a Dutch-German pharmaceutical wholesaler of hard-to-find unlicensed medicines, which provides essential therapies in areas where approved treatments are unavailable.
High pricing, fast-track approvals and market exclusivity against generic drugs have also attracted investors. Intermediate Capital Group and Andera Partners made $1.05 billion in March from the sale of Amolyt Pharma, a provider of therapeutic peptides for rare endocrine diseases, to AstraZeneca, with ICG reporting an attractive IRR and money multiple.
Toby Sykes, managing director of ICG, told PE Hub that large pharma companies are pursuing M&A to replenish their pipelines as many high-profile drugs go off-patent.
“That’s why we’re seeking to provide scale-up capital to de-risked clinical stage opportunities, which we feel is exactly where the large pharmaceutical and biotech companies want to acquire right now,” he said. “We’ve seen several high-profile transactions in life sciences, resulting in big exits for investors in the private and public markets.”
It was one of seven deals that PE Hub covered in a listicle on PE investments in pharma companies focused on rare diseases.
Expanded access to pharma services
Home delivery of over-the-counter (OTC) and prescription medications have also become a strong investment point. A recent example is Cardinal Health, which announced its acquisition of Advanced Diabetes Supply Group, an in-home distributor of diabetic medications, from Court Square in November for approximately $1.1 billion.
PE Hub was the first to report in January that ADS was to be put up for sale by Court Square in the early part of the year in an auction run by Houlihan Lokey. Sources told me ADS was to be marketed on $100 million of EBITDA, pegging the continuous glucose monitoring (CGM) device company at an 11x EBITDA multiple.
Click here for more insight on 2024 pharmaceutical industry trends.
That’s a wrap for me. Stay tuned for Irien Joseph bringing you the Europe edition of the Wire tomorrow and John R Fischer delivering the US edition.
Cheers,
Michael
