The role of a non-exec can vary significantly from business to business, depending on its scale, stage, and strategy. However, a good non-exec will always contribute objectivity, challenge and support to the executive management team and will help to fill capability and knowledge gaps as the board develops and implements their plans.
Often the executive team will select a non-executive director based on a perception of their specific challenges and will look for a candidate who has had prior success in that area. For example, prior experience of implementing a successful US sales strategy, transitioning a business model (e.g., software to SaaS) or a buy and build acquisitions plan might be extremely valuable to a CEO without that direct experience themselves.
The same objectivity, challenge, support and areas of specific expertise, are equally valid as a business contemplates and then enters a transaction process. There are three key areas where non-execs can have a particularly valuable role to play; these are Preparation, People and Perspective.
Preparation
An experienced non exec can play a key role in helping a board to prepare for a transactional process. Helping the executives consider all aspects of a potential transaction with a view to clearly defining their desired outcomes, to set a realistic plan and timeframe and to allocate roles and responsibilities can avoid considerable wasted time and distraction later.
A non-exec with their own direct experience of a disposal or fund-raising process will understand the steps in an M&A process and will support their Board not to under-estimate the investment of time necessary to execute a successful deal or the very detailed nature of the information required for due diligence and disclosure processes. If the transaction is an acquisition, they will help the Board to understand the highly iterative nature of the negotiation process.
A strong non-exec will also understand the nature of the advice and project management support which is required from external advisers. They will be able to help the board define the criteria by which prospective advisers should be assessed, help set expectations around scope and fees, and can lead the appointment process. With a plethora of advisory firms to select from in the M&A arena, the non-exec will be able to help determine whether geographical reach, sector knowledge, resource capacity, a hands-on approach, experience, or fees are most important to the case in question and to identify appropriate potential advisers to present to the Board.
People
A non-exec ought to have a very clear and deep understanding of the dynamics between individuals on the board and their relationship with the shareholders (if not the same group) and should be able to help allocate roles and responsibilities in a transaction in a way which optimises strengths and preserves trust.
A transactional process, particularly in a disposal or investment-raising process can be an intense, emotional and time-consuming experience. Workloads between board members can be unequal and those not immediately involved in the process can feel excluded or marginalised. The experienced non-exec will ensure that all parties are kept informed at every step of the process and that key decisions are properly and fully socialised. They can provide a useful “back channel” for individuals to air concerns or even grievances and for clarifications or amplifications to be sought.
The Non-Exec also has a part to play in building and developing a relationship with “the other side”. Without the burden of the day-job and with an objective overview of the process, they can help orient the social-side of the deal; whether it is hosting or chairing “getting to know you” meetings, attending dinners with would-be private equity investors to make sure none of the executives put their foot in it after a glass too many of wine, and reading the body language of buyers, vendors and investors while the executives are presenting or debating.
If the relationship with the appointed advisers should come under pressure at any point, the non-exec should be able to help clarify the issue and objectively address it with the individual or individuals concerned. Perhaps the Board hadn’t fully appreciated how long due diligence enquiries can last, perhaps the CEO is difficult to pin down to delivering information or meeting dates, perhaps the adviser is perceived not to be following the process laid out in their pitch, perhaps it has been too long since the shareholders have seen the lead adviser and are concerned about his/her focus. Here the skilled non-exec should be able to weigh up the legitimacy of the concern and address it pragmatically to help unstick the process.
Of course, many times the non-exec is also a principal in the deal, albeit often a relatively minor shareholder. Sometimes they might find that they face a potential conflict in terms of how an issue between the parties to a transaction is resolved, or where their own outcome is directly impacted by a pragmatic fix to the outcomes of others. This is often in the sphere of tax structuring. Normally a non-exec will not transition from the old regime into the new and it is sometimes challenging therefore to stand back from self-interest and support the wider team and the wider deal. However an experienced non-exec will be able to do that and to put the wider interest before their own in the interests of fulfilling their role with integrity.
Perspective
Finally, an experienced and worthy non exec will bring perspective to the deal process.
They can contextualise the multiple micro negotiations that come later in the deal process so that the executive team and/or shareholders can see them in context of the overall transaction and not allow them to undermine or damage relationships with the other side.
Alongside the advisory team, a non-exec will sit with the board and bring perspective and objectivity at a time when the principal team will often be weary, mistrustful and deal-fatigued. Providing encouragement, support, context and perspective the strong non-exec can help the advisory team to put individual concerns to rest where they are unfounded and to shape them effectively where they are not.
Finally, the non exec should ensure, throughout the process, that in addition to the transaction itself, the Board continues to focus on its core responsibilities to the company, the shareholders and other stakeholders. They will be able to redirect focus when it is lost, identify if conflicts arise between the individual interest and the corporate one and create space for individuals if they need to concentrate on trading, compliance or one-off issues for a period.
Conclusion
Though many transactions can and do complete without the support and input of a non executive board director; there are many ways in which a strong non-exec can add value.
The role of a non-exec can vary significantly from business to business, depending on its scale, stage, and strategy. However, a good non-exec will always contribute objectivity, challenge and support to the executive management team and will help to fill capability and knowledge gaps as the board develops and implements their plans.
Often the executive team will select a non-executive director based on a perception of their specific challenges and will look for a candidate who has had prior success in that area. For example, prior experience of implementing a successful US sales strategy, transitioning a business model (e.g., software to SaaS) or a buy and build acquisitions plan might be extremely valuable to a CEO without that direct experience themselves.
The same objectivity, challenge, support and areas of specific expertise, are equally valid as a business contemplates and then enters a transaction process. There are three key areas where non-execs can have a particularly valuable role to play; these are Preparation, People and Perspective.
Preparation
An experienced non exec can play a key role in helping a board to prepare for a transactional process. Helping the executives consider all aspects of a potential transaction with a view to clearly defining their desired outcomes, to set a realistic plan and timeframe and to allocate roles and responsibilities can avoid considerable wasted time and distraction later.
A non-exec with their own direct experience of a disposal or fund-raising process will understand the steps in an M&A process and will support their Board not to under-estimate the investment of time necessary to execute a successful deal or the very detailed nature of the information required for due diligence and disclosure processes. If the transaction is an acquisition, they will help the Board to understand the highly iterative nature of the negotiation process.
A strong non-exec will also understand the nature of the advice and project management support which is required from external advisers. They will be able to help the board define the criteria by which prospective advisers should be assessed, help set expectations around scope and fees, and can lead the appointment process. With a plethora of advisory firms to select from in the M&A arena, the non-exec will be able to help determine whether geographical reach, sector knowledge, resource capacity, a hands-on approach, experience, or fees are most important to the case in question and to identify appropriate potential advisers to present to the Board.
People
A non-exec ought to have a very clear and deep understanding of the dynamics between individuals on the board and their relationship with the shareholders (if not the same group) and should be able to help allocate roles and responsibilities in a transaction in a way which optimises strengths and preserves trust.
A transactional process, particularly in a disposal or investment-raising process can be an intense, emotional and time-consuming experience. Workloads between board members can be unequal and those not immediately involved in the process can feel excluded or marginalised. The experienced non-exec will ensure that all parties are kept informed at every step of the process and that key decisions are properly and fully socialised. They can provide a useful “back channel” for individuals to air concerns or even grievances and for clarifications or amplifications to be sought.
The Non-Exec also has a part to play in building and developing a relationship with “the other side”. Without the burden of the day-job and with an objective overview of the process, they can help orient the social-side of the deal; whether it is hosting or chairing “getting to know you” meetings, attending dinners with would-be private equity investors to make sure none of the executives put their foot in it after a glass too many of wine, and reading the body language of buyers, vendors and investors while the executives are presenting or debating.
If the relationship with the appointed advisers should come under pressure at any point, the non-exec should be able to help clarify the issue and objectively address it with the individual or individuals concerned. Perhaps the Board hadn’t fully appreciated how long due diligence enquiries can last, perhaps the CEO is difficult to pin down to delivering information or meeting dates, perhaps the adviser is perceived not to be following the process laid out in their pitch, perhaps it has been too long since the shareholders have seen the lead adviser and are concerned about his/her focus. Here the skilled non-exec should be able to weigh up the legitimacy of the concern and address it pragmatically to help unstick the process.
Of course, many times the non-exec is also a principal in the deal, albeit often a relatively minor shareholder. Sometimes they might find that they face a potential conflict in terms of how an issue between the parties to a transaction is resolved, or where their own outcome is directly impacted by a pragmatic fix to the outcomes of others. This is often in the sphere of tax structuring. Normally a non-exec will not transition from the old regime into the new and it is sometimes challenging therefore to stand back from self-interest and support the wider team and the wider deal. However an experienced non-exec will be able to do that and to put the wider interest before their own in the interests of fulfilling their role with integrity.
Perspective
Finally, an experienced and worthy non exec will bring perspective to the deal process.
They can contextualise the multiple micro negotiations that come later in the deal process so that the executive team and/or shareholders can see them in context of the overall transaction and not allow them to undermine or damage relationships with the other side.
Alongside the advisory team, a non-exec will sit with the board and bring perspective and objectivity at a time when the principal team will often be weary, mistrustful and deal-fatigued. Providing encouragement, support, context and perspective the strong non-exec can help the advisory team to put individual concerns to rest where they are unfounded and to shape them effectively where they are not.
Finally, the non exec should ensure, throughout the process, that in addition to the transaction itself, the Board continues to focus on its core responsibilities to the company, the shareholders and other stakeholders. They will be able to redirect focus when it is lost, identify if conflicts arise between the individual interest and the corporate one and create space for individuals if they need to concentrate on trading, compliance or one-off issues for a period.
Conclusion
Though many transactions can and do complete without the support and input of a non executive board director; there are many ways in which a strong non-exec can add value.
In case you hadn’t noticed, the world is electrifying. From transport to building management to energy storage, demand for electricity is now accelerating faster than ever before.
More than any other influencing factor in the UK energy industry, this energy transition has become the predominant theme and motivator for utility M&A in recent years.
At its core, the market challenge is how to balance increasing electricity demand with a decline in fossil-fuel derived power, whilst also managing around the intermittent power generation inherent to most renewable energy sources. In solving the problem, major utilities must also balance three key considerations:
Energy Sustainability – achieving supply and demand-side savings to more efficiently manage consumption
Energy Equity – ensuring accessibility and affordability of energy across the population
Energy Security – driving reliable energy infrastructure with the ability to meet future demand
As such, it has become clear to most that pivoting to a more sustainable business model cannot be done quickly or painlessly. Market participants are also finding that the pace of change demanded by shareholders, consumers, regulators and politicians cannot be easily met organically.
M&A Backdrop
This is creating opportunity for both investment and M&A at all stages of the energy generation value chain, as well as across the energy services ecosystem.
Facing such political and shareholder pressure, BP, Shell and other European oil majors already see the writing on the wall. In recent years they’ve announced plans to gradually retreat from fossil fuels, slash emissions and embrace clean energy, including electric vehicle charging and renewable generation.
Whilst wind and solar are undoubtedly the leading renewable themes, some major firms such as Chevron are taking a different tack. The 141-year-old company recently announced that it may not be an oil-first company within a generation, and will instead focus on three growth areas: carbon capture and storage, hydrogen and renewable natural gas.
These diverging strategies highlight the degree of uncertainty that still remains over which of the emerging technologies will ultimately prevail and scale, which can make starting from scratch a costly endeavour. The opportunity to “future-proof” by incubating, funding, acquiring, integrating and growing innovative solutions within their ecosystem is now becoming fundamental for large firms navigating towards net zero.
Recent transactions in the sector have demonstrated the point. The big oil and gas groups continue to jostle for position in residential and commercial EV charging networks, with Total acquiring London based network Source London, and Shell acquiring home energy storage company Sonnen and European on-street vehicle charging provider Ubitricity. BP meanwhile bought Chargemaster and FreeWire within months of each other in 2018. Even the EV network challenger brands are consolidating – Gridserve’s recent acquisition of Ecotricity’s Electric Highway EV charging network a case in point.
The pace of investment will only accelerate over the coming years, with research from the Society of Motor Manufacturers and Traders (SMMT) estimating that an investment of £16.7bn will be required in public EV charging infrastructure if the UK is to be ready for the ban on sales of cars with an internal combustion engine in 2035.
Intelligent capacity management
The emerging distributed and flexible energy system represented by EV charging networks is also changing the market for National Grid distribution system and network operators. These firms can now tap into flexible generating assets, batteries and demand side management tools to reinforce the grid without making expensive upgrades to the network.
HMT recently worked with energy marketplace company Piclo on their Series A investment from the Clean Growth Fund and Mott McDonald Ventures. The company is hosting SP Energy Networks largest tender for 1.4GW to reinforce their network on the back of UK Power Network, having just been awarded £30million in flexibility contracts on their latest tender.
Additionally Origami Energy recently raised a £20m round led by Barclays, investing as part of their Sustainable Impact Capital Initiative. The business provides digital solutions to better manage, coordinate and trade the supply and demand requirements of the power grid and renewable assets.
Exit Opportunities
The impact of this activity for scaling CleanTech companies is an exit market that has arguably never been so buoyant. Corporate acquirers and investors are closely competing for emerging technologies and are willing to pay high valuations to do so.
It’s rarely opportunistic luck that brings about the most attractive exit – planning, refining and then positioning for the exit strategy must start early for prospective targets.
Venture money is there for well thought out early and growth stage businesses, especially those that can demonstrate early product/market fit.
There are also proven benefits to bringing strategic investors onto the cap table early to endorse the offering, as well as to provide help with market entry and access to distribution channels. Corporate venture investing is buoyant right now as was the case in HMT’s recent transaction with Piclo (Mott McDonald) and nanotech energy efficiency company HT Material Science (Saudi Aramco).
If you have already raised significant capital and require more, there are less-dilutive (or even non-dilutive) options available in the growing venture debt market. Extending the runway through a debt raise can be an efficient way to drive further market adoption and scale. Used correctly, debt can act as a useful bridge to the next equity round or to an exit, whilst also clearly signalling your commercial traction on the acquisition radar for Big Energy.
When looking to exit, its important to engage in a carefully orchestrated global sale process to uncover buyer interest across an increasingly borderless market for Big Energy M&A.
HMT has supported dozens of high-growth CleanTech businesses on their journey in its 29 year history with leading credentials in the sector and strong relationships with industrials. If you’re contemplating entering into a transaction, please do get in touch with our team on 01491 579740.
In case you hadn’t noticed, the world is electrifying. From transport to building management to energy storage, demand for electricity is now accelerating faster than ever before.
More than any other influencing factor in the UK energy industry, this energy transition has become the predominant theme and motivator for utility M&A in recent years.
At its core, the market challenge is how to balance increasing electricity demand with a decline in fossil-fuel derived power, whilst also managing around the intermittent power generation inherent to most renewable energy sources. In solving the problem, major utilities must also balance three key considerations:
Energy Sustainability – achieving supply and demand-side savings to more efficiently manage consumption
Energy Equity – ensuring accessibility and affordability of energy across the population
Energy Security – driving reliable energy infrastructure with the ability to meet future demand
As such, it has become clear to most that pivoting to a more sustainable business model cannot be done quickly or painlessly. Market participants are also finding that the pace of change demanded by shareholders, consumers, regulators and politicians cannot be easily met organically.
M&A Backdrop
This is creating opportunity for both investment and M&A at all stages of the energy generation value chain, as well as across the energy services ecosystem.
Facing such political and shareholder pressure, BP, Shell and other European oil majors already see the writing on the wall. In recent years they’ve announced plans to gradually retreat from fossil fuels, slash emissions and embrace clean energy, including electric vehicle charging and renewable generation.
Whilst wind and solar are undoubtedly the leading renewable themes, some major firms such as Chevron are taking a different tack. The 141-year-old company recently announced that it may not be an oil-first company within a generation, and will instead focus on three growth areas: carbon capture and storage, hydrogen and renewable natural gas.
These diverging strategies highlight the degree of uncertainty that still remains over which of the emerging technologies will ultimately prevail and scale, which can make starting from scratch a costly endeavour. The opportunity to “future-proof” by incubating, funding, acquiring, integrating and growing innovative solutions within their ecosystem is now becoming fundamental for large firms navigating towards net zero.
Recent transactions in the sector have demonstrated the point. The big oil and gas groups continue to jostle for position in residential and commercial EV charging networks, with Total acquiring London based network Source London, and Shell acquiring home energy storage company Sonnen and European on-street vehicle charging provider Ubitricity. BP meanwhile bought Chargemaster and FreeWire within months of each other in 2018. Even the EV network challenger brands are consolidating – Gridserve’s recent acquisition of Ecotricity’s Electric Highway EV charging network a case in point.
The pace of investment will only accelerate over the coming years, with research from the Society of Motor Manufacturers and Traders (SMMT) estimating that an investment of £16.7bn will be required in public EV charging infrastructure if the UK is to be ready for the ban on sales of cars with an internal combustion engine in 2035.
Intelligent capacity management
The emerging distributed and flexible energy system represented by EV charging networks is also changing the market for National Grid distribution system and network operators. These firms can now tap into flexible generating assets, batteries and demand side management tools to reinforce the grid without making expensive upgrades to the network.
HMT recently worked with energy marketplace company Piclo on their Series A investment from the Clean Growth Fund and Mott McDonald Ventures. The company is hosting SP Energy Networks largest tender for 1.4GW to reinforce their network on the back of UK Power Network, having just been awarded £30million in flexibility contracts on their latest tender.
Additionally Origami Energy recently raised a £20m round led by Barclays, investing as part of their Sustainable Impact Capital Initiative. The business provides digital solutions to better manage, coordinate and trade the supply and demand requirements of the power grid and renewable assets.
Exit Opportunities
The impact of this activity for scaling CleanTech companies is an exit market that has arguably never been so buoyant. Corporate acquirers and investors are closely competing for emerging technologies and are willing to pay high valuations to do so.
It’s rarely opportunistic luck that brings about the most attractive exit – planning, refining and then positioning for the exit strategy must start early for prospective targets.
Venture money is there for well thought out early and growth stage businesses, especially those that can demonstrate early product/market fit.
There are also proven benefits to bringing strategic investors onto the cap table early to endorse the offering, as well as to provide help with market entry and access to distribution channels. Corporate venture investing is buoyant right now as was the case in HMT’s recent transaction with Piclo (Mott McDonald) and nanotech energy efficiency company HT Material Science (Saudi Aramco).
If you have already raised significant capital and require more, there are less-dilutive (or even non-dilutive) options available in the growing venture debt market. Extending the runway through a debt raise can be an efficient way to drive further market adoption and scale. Used correctly, debt can act as a useful bridge to the next equity round or to an exit, whilst also clearly signalling your commercial traction on the acquisition radar for Big Energy.
When looking to exit, its important to engage in a carefully orchestrated global sale process to uncover buyer interest across an increasingly borderless market for Big Energy M&A.
HMT has supported dozens of high-growth CleanTech businesses on their journey in its 29 year history with leading credentials in the sector and strong relationships with industrials. If you’re contemplating entering into a transaction, please do get in touch with our team on 01491 579740.
