Although deal activity remains relatively subdued in line with wider economic conditions, a raft of recent transactions has underlined how Scotland is benefiting from an acceleration of investment in the clean energy sector.
Much of the heightened interest is being driven by expansion of the offshore wind sector, evidenced by the second quarter’s most significant deal being the Moray West offshore wind farm securing £2 billion of project finance.
Ardersier Port, between Inverness and Nairn, also received an initial £300 million commitment from US-based energy investment specialist Quantum as it looks to capitalise on a huge potential pipeline of work on ScotWind offshore projects.
Chris Kerr, a partner at Harper Macleod which has advised on projects generating more than half of Scotland’s renewable electricity, reports “significant interest in projects right across the Scottish renewable energy spectrum”.
“What’s particularly encouraging to see is the level of interest from outside of Scotland. Funders and investors see Scotland as a strong place to do business,” he says.
However, Kerr cautions that business models for renewable projects are currently coming under pressure because of the rising cost of materials such as steel and copper and the UK Government’s windfall tax on electricity generators.
“These factors, combined with the uncertainties of future electricity prices, means many renewable projects are now more marginal than they were before the pandemic and conflict in Ukraine,” he points out.
The Moray West project, backed by Ocean Winds and Ignitis Group, is now finalising supply chain activity ahead of installation works starting later this year.
Barclays, HSBC, Lloyds Bank and NatWest were among the lenders, with advisors including Shepherd & Wedderburn, Burness Paull and EY.
Elsewhere in the sector, two ‘shovel-ready’ co-located solar and battery storage projects in Scotland, Strathruddie Farm and Montreathmont Moor, were sold by Rivington Solar to EVC Kilt in a deal advised on by Burges Salmon.
The wider energy sector is also seeing heightened levels of mergers and acquisitions activity, fuelled in part by the impact of the Ukraine invasion. Aberdeen energy services giant Wood received a takeover approach from Apollo Global Management, although the US firm later decided not to proceed with an offer.
However, the acquisition of North Sea oil and gas producer Hurricane Energy – which has its operational base in Aberdeen – by Prax Exploration & Production is still proceeding. The deal values Hurricane, being advised by Dentons, at up to £249 million.
Although latest figures show the value and volume of venture capital investment into Scottish businesses slumped at the start of 2023, several deals in recent weeks could point to something of a recovery.
The Scottish National Investment Bank added to its portfolio through a £5 million investment in cloud platform specialist Forrit in a move that will see the creation of 15 new jobs at the Edinburgh-based firm.
In the healthtech sector Bioliberty secured £2.2 million to develop a robotic glove that can restore upper limb mobility in patients who have suffered a stroke. The funding round was led by angel investment firm Archangels and supported by Eos Advisory, Old College Capital and Hanna Capital SEZC.
Elsewhere in the sector, remote ophthalmic technology business IbisVision won £4.5 million in growth funding to back expansion plans. The round was led by Miami-based Compiler VC, also supported by existing investors Deepbridge and Scottish Growth Investments.
Amy Burnett, KPMG private enterprise senior manager in Scotland, says that after a bumper period for venture capital investment because of the pandemic things are starting to return to normal levels, albeit compounded by a challenging economic environment.
“The dynamic of the two factors together is making the disparity even bigger, but investor sentiment in the UK is starting to turn slightly with some cautious positivity that the worst of the market turbulence might be over.”
Other funding deals saw Aberdeen-based remotely operated vehicle specialist ROVOP, which is backed by private equity player Bluewater, secure a $25 million credit facility with Cordiant Capital.
Edinburgh-based agricultural technology firm Dyneval received over £500,000 of backing to accelerate the development of a portable instrument for semen analysis which could save the industry millions each year. The investment, by Kelvin Capital, Scottish Enterprise, Gabriel Investments and Par Equity, was advised on by Thorntons.
Maven Capital Partners also completed a follow-on investment of £1.25 million in global carpool and on-demand transport technology provider Liftango, based in Edinburgh. A further £1.25 million was provided by Scottish Enterprise alongside a significant but undisclosed investment from other existing investors.
Among the few management buy-outs Stephen McCranor and Keli Mitchell, joint managing directors of Glasgow creative communications agency Frame, acquired a majority stake in the company. Harper Macleod advised the outgoing shareholders Gary O’Donnell and Angus Walker.
Recent months have seen another flurry of employee buyouts, including one that saw Dot Surveying become what is thought to be the first employee-owned company in its field.
The Edinburgh-based property surveying company, which employs 21, was founded in 2020 by Tom Gallivan who was the sole shareholder prior to the deal. Advisors included Henderson Loggie, Anderson Strathern and Ownership Associates with financial backing from Thincats.
Recent high-profile acquisitions of Scottish businesses included global digital transformation consultancy Kin + Carta acquiring Edinburgh’s Forecast Data Services which specialises in artificial intelligence and machine learning to drive business performance.
Acquisitions by Scottish firms included a deal which saw spirits group Edrington become a majority shareholder in Wyoming Whiskey, building on the 35 per cent stake the Scottish firm took in the brand in 2018.