Good Price, Good Deal?


August 10, 2012

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A good price doesn’t always make for a good deal. At least that’s been the lesson for UTC as it finally offloads troubled turbine manufacturer Clipper Windpower from its industrial portfolio.

As the back-story goes, UTC bought a partial stake in Clipper to find an easy way into a market in which it didn’t have any experience.

At that stage Clipper had big plans: A 10MW offshore turbine, named Britannia, was to be built at a brand new facility in the UK. The project even had financial support from DECC and the Crown Estate and seemed to be a dead cert.

But UTC got cold feet about the future of UK offshore wind, particularly as it looked to come up against strong competition from Siemens, Vestas and Gamesa. The project was quietly dropped and the funds returned to the UK Government.

By this stage UTC had been forced to buy the remainder of the firm, reasoning that its better to have control of the business you’re lending vast sums to. But without its ‘next big thing’ in the offing, things got steadily worse for Clipper.

It would of course be unfair to single out Clipper as worse than any other turbine manufacturer – after all, most European and US firms are finding the market a tough place to operate in right now. However, it goes to show that even with the industrial might of UTC, Clipper couldn’t be made to work.

It’s a brave buy by Platinum Equity too, the new owner. There are rumours that the PTC may be continued, but either way, 2013 is still going to be a light year for wind projects in the US.

But judging by Platinum Equity’s track record of buying companies and investing in their operational assets, rather than just stripping them back to their most profitable (as practiced by some PE funds) logic dictates we’ll see Clipper looking to compete in the European markets again in the near future.

So what does this chapter in the wind energy industry tell us?

Well, just because the numbers stack up on paper, the deal isn’t always right. Mergers and acquisitions in this market will always be about more than just the financials. They’re about attaining synergies and w orking relationships that extend beyond the corporate mindset of the management.

We’ll undoubtedly see more mergers, acquisitions and company divestitures in the market as the industry matures. However, as the UTC saga demonstrates, the ones that will truly lead to long-term sector success will be those that look beyond the balance sheet.

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