It is fair to say that when BIC, the Paris-based company known for lighters and shavers and pens, announced on December 2 that it has acquired Vancouver-based Angstrom Power, there was some surprise.
Angstrom has had a commercial portable fuel cell for some time now, unlike many of its rivals, but what does BIC see in the fuel cell industry that convinced it to pay a rumoured $18.5 million in these times of economic austerity? And is this the first signal that 2012 will see a round of M&A in the fuel cell industry?
The companies involved in the fuel cell sector tend to be of two types. The first are daughter companies of large, stable, multinational companies, which can invest for a long term outlook and understand the time horizon to return on assets is longer for new disruptive products than for their traditional offerings. Companies such as UTC Power and Rolls Royce Fuel Cells clearly fall into this category. The other, much more common, company is the small startup, where a couple of engineers who’ve stumbled out of the lab after years of toil into the bright sunshine with their new technology. A company is formed, often at this stage supported by some form of government subsidy or angel investment, with the aim of taking the product to market. But many fuel cell startups have stubbornly stayed in the pre-commercial phase. A rule of thumb is that for every fuel cell company with a commercial product, there are another seven to 10 that are pre-commercial.
So why would a global multinational with a well-known product portfolio decide to sink many millions of dollars into a fledgling industry with a reputation for over-promising and under delivering? BIC’s answer is that it has been developing hydrogen cartridges for portable power devices for nearly a decade, and there are a number of complementary areas with Angstrom Power.
That being the case, will other multinationals look to acquire fuel cell companies? Almost certainly. I wouldn’t call them sharks circling, or wolves on the hunt, but large companies that have a history of forward-looking investment and feel the time is right to bring a fuel cell startup to the commercial product stage are likely to leap in. After all, when a company is bought outright not only is the IP transferred to the new owners, but they also control the route to market, marketing and distribution: three areas the fuel cell industry has almost completely failed at.
Looking at the three main sectors of transport, portable and stationary, we see that in transport most independent companies are in the supply chain, in portable there’s a mix between stack and system developers, and in stationary there is also a good mix of independent stack and system developers. With the increased global focus on clean energy and energy efficiency, the stationary sector is likely to see the highest interest from large corporations, at least for the next 12 – 18 months. Later, as we get closer to the roll out dates of volume fuel cell vehicles, it will make sense for a number of independent vendors to be rolled up into one end-to-end company. This transport M&A activity will likely kick off sometime late 2013.
The fuel cell industry for too long has been dependent on government handouts. Time to move on folks, get real and get commercial. And this is going to require selling up.