Inspired Energy makes makes strategic investment in Ignite Energy

Corporate energy consultant Inspired Energy has today completed the acquisition of an initial 40% of Ignite Energy, it announced on Friday.

The AIM-traded firm said it paid £5m net, calculated on a cash-free, debt-free basis, for the strategic investment.

It also had an exclusive option, until 31 July 2021, to acquire the balancing interest of 60% under the terms of an option agreement.

The company’s board said it believed the strategic investment accelerated its ability to deliver on its stated strategy to grow its market share within the third-party intermediary optimisation services market.

Inspired explained that Ignite offered a “full spectrum” of energy management services, with a strong focus on delivering energy efficiency projects and optimisation services to large, multi-site estate intensive, commercial energy customers, including Halford's, SSP, Network Rail and WHSmith.

It said Ignite's optimisation services supported clients through increasing the effectiveness of their energy consumption, by implementing large-scale energy demand reduction projects.

The acquisition’s specialism in efficiency projects and optimisation services was said to be “highly complementary” to Inspired's customer base, with a particular relevance to ots estate and energy-intensive customer segments.

Ignite also provided consultancy services such as energy procurement and energy accounting services to UK corporates, aligned to Inspired's core corporate offering.

On top of the £5m already paid for the acquisition, Inspired said that further contingent consideration of up to £3m could become payable in cash, subject to the achievement of certain financial performance targets for the year ending 31 December.

The profits available for distribution of Ignite would be paid by dividend to its shareholders on a bi-annual basis on 1 January and 1 July each year, pro rata to its shareholdings.

Inspired said the initial consideration was financed from its existing resources, with funding provided by a drawdown of its existing £12.5m acquisition facility with Santander.

Mark Dickinson and Paul Connor would join the board of Ignite, which would consist of five people.

Under the option agreement, from completion until 31 July 2021, Inspired would have an exclusive one-way call option to acquire the outstanding balance of 60% of the issued share capital of Ignite.

Under the terms of the option agreement, Inspired would pay consideration for the remaining Ignite shares equal to an enterprise value of 6.0x EBITDA.

The option consideration would be based on a minimum EBITDA of £3m, and at the time of exercising the option agreement, an amount of £10.8m would become payable by Inspired.

Should the EBITDA be greater than £3m, then additional consideration would become payable by Inspired, being the higher of 6.0x Ignite's EBITDA for the last 12 months ending on the date of the exercise of the option, or 6.0x Ignite's EBITDA for the financial year ending the year in which the option was exercised, both less the £10.8m already paid on exercise of the option, subject to a maximum EBITDA of £7m.

Any additional consideration due would be payable within 90 days following the end of the financial year in which the option agreement was exercised, with Ignite's financial year end being 31 December.

“We are delighted to conclude our strategic investment in Ignite, a business which is highly complementary to Inspired's core corporate division,” said Inspired Energy chief executive officer Mark Dickinson.

“The strategic investment significantly broadens and accelerates our optimisation service offering.

“Ignite has proven itself, over many years, to be capable of achieving material improvements to the energy efficiency of its clients.”

Dickinson noted that Inspired currently had more than 500 clients within the estate and energy-intensive segments, who met the Ignite customer profile, and could benefit from the services that Ignite provided.

“We look forward to working closely with the highly experienced and knowledgeable team of Ignite and welcoming them into the group as we continue to extend our position as a market leader.”