M&A consultants advise Octopus Energy on landmark deals

Big Four firm KPMG has advised power supplier Octopus Energy on two landmark deals, lifting the value of the business to just over $2 billion. KPMG Corporate Finance helped the sustainable energy firm broker a 20% equity stake sale to Origin Energy earlier in 2020, while in December it helped cement a $250 million investment deal with Tokyo Gas.

Founded in 2015, Octopus Energy is a UK-based retail electricity and gas supplier specialising in sustainable energy. A subsidiary of the £9 billion UK investor in energy, technology and growth businesses Octopus Group, Octopus Energy has operations in the UK, Germany, and the US, while as of May 2020 the company had over 1.5 million domestic and business customers. It also provides software services to other energy suppliers.

In the first half of 2020, Octopus Energy looked to enable further expansion with an equity sale that culminated in May. Eventually this saw Origin Energy take a 20% stake in the firm, with the deal seeing a first-of-its-kind deep commercial collaboration between a UK-based challenger retailer, and an established Australian utility. Origin Energy is a leading Australian energy company with approximately 4.2 million customer accounts in addition to significant generation capacity, meaning that its partnership with Octopus helps cement the firm’s reputation as a company built to address the demands of the future of energy.

Octopus Energy Founder and CEO, Greg Jackson, commented, “We’re thrilled to be able to accelerate our global expansion to make the green energy transition cheaper and faster. It’s a testament to our team and our technology that in just four years we’ve created a business which has the world beating a path to our door and can face the future with such excitement. We’ve known Origin for a long time, and it has the most forward-thinking management of any market-leading energy company we’ve met.”

KPMG acted as lead advisors in the agreement, which will also see Origin license Octopus Energy’s technology platform, Kraken, to accelerate the transformation of its Australian retail business, deliver an improved customer experience and to provide cleaner and smarter energy solutions. Origin will also provide a three-year company guarantee to support the working capital for Octopus Energy’s UK and international energy business. KPMG’s deal team included Amy Marshall, Gavin Quantock, Michael Mackintosh, Sarah Strachan, and Pardeep Sauari, among others.

Gavin Quantock, Co-head of Energy M&A at KPMG, said, “This is one of the biggest ever transactions in the independent UK energy retail market, driven by a company with the components needed to succeed in challenging times. The prominence of Octopus’ platform as a differentiator reinforces the crucial role of technology as the industry globally moves through the energy transition, and KPMG are proud to have played a part in powering Octopus to the next stage of its global corporate journey.”

Tokyo Gas

Months later, KPMG helped Octopus Energy land another deal, further bolstering the firm’s quest to accelerated its ‘renewables revolution’ plan. Securing the second major international partnership enabled Octopus Energy to enter the Japanese market in 2021, as well as further adding to the firm’s estimated value.

Octopus Energy CEO Jackson remarked, “When Origin invested 7 months ago, we said it was fuel for stage two of our mission. Since then, Octopus Energy has accelerated that mission to make the global green revolution faster and cheaper by launching Octopus Energy Germany and New Zealand, acquiring Octopus Energy USA and acquiring Upside Energy to deepen our smart grid capabilities with their powerful technology… Tokyo Gas’s investment into Octopus Energy Group, and the additional investment from Origin, will enable our amazing team to drive even faster at the forefront of the global energy revolution.”

The agreement with Tokyo Gas secures more than $250 million of additional investment for UK-headquartered Octopus Energy as part of a 9.7% equity stake sale, while increasing the group’s valuation to $2.1 billion. Octopus Energy and Tokyo Gas will now launch a company named TG Octopus Energy (consumer brand Octopus Energy), a 30:70 joint venture, in Japan, backed by working capital and growth funding provided by Tokyo Gas. International tech heaven Tokyo will meanwhile function as a launchpad for Octopus's expansion into the Asian market.

KPMG’s Quantock added, “This is another landmark moment for Octopus Energy at a time when the wider utilities and energy markets are going through a period of uncertainty and change… KPMG’s Energy Lead Advisory supported the business with its strategic partnership in Australia as well as acting as lead advisors in this agreement.. Japan currently lags behind the UK with only 18.9% of electricity generated by renewables, compared with 37.9% in Great Britain and Northern Ireland. With leaders in Japan and across Asia now fully embracing the shift away from traditional power sources, there’s a golden opportunity for a UK-founded company to be right at the heart of the renewables revolution.”