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Smart grid venture capital (VC) funding showed some signs of life in the third quarter of this year (Q3'12), with $238 million in 12 deals, according to a new report from Mercom Capital Group LLC. The rise in funding was mostly due to $136 million raised by Alarm.com, a security and home automation company.

The report notes that VC funding in the last three quarters had been relatively weak (Q4'11 saw $66 million in 10 deals; Q1'12 had $62 million in 10 deals; and Q2'12 had $66 million in nine deals), whereas VC funding - even without the Alarm.com transaction - exceeded $100 million this quarter.

“The Alarm.com funding deal and the acquisition of Vivint for $2.2 billion by Blackstone Group is part of a growing trend where home security companies have expanded into home automation,” says Raj Prabhu, managing partner at Mercom Capital Group. “We expect to see more transactions in this niche where security, cable and telecom companies expand their offerings to cover the whole ‘connected or digital’ home services, which would include everything from communication and automation services to solar installations.”

Apart from Vivint and Alarm.com, other companies in the home security/home automation business that were involved in funding and mergers and acquisition (M&A) deals in the last few years include AlertMe, Intamax Systems, Control4, iControl Networks, Home Automation, APX Alarm and Xanboo.

Top five deals this quarter included the following:

- $136 million raised by Alarm.com from ABS Capital Partners, Equis Capital Partners, NJTC Venture Fund and Technology Crossover Ventures;

- GridPoint, an energy management company, raised $23.3 million (investors undisclosed);

- Viridity Energy, a demand side management solutions company, raised $15 million from Mitsui;

- Space-Time Insight, a geospatial information systems company, raised $14 million from EnerTech Capital, Novus Energy Partners, ClearSky Power & Technology Fund, Opus Capital Ventures and Start Up Farms International; and

- SIGFOX, a wireless connectivity solutions provider for smart metering, building intelligence and M2M among other markets using ultra narrow band technology, raised $12.6 million from Intel Capital, Elaia Partners, Partech Ventures International and iXO Private Equity.

M&A activity in Q3’12 totaled $2.2 billion in five transactions. Top M&A transactions were the $2 billion acquisition of Vivint, a home automation services company, by Blackstone, and the $183 million acquisition of smart grid and automation solutions provider ZIV Group by electrical transmission and distribution equipment company Crompton Greaves.

“We will also be watching for strategic M&As in this area as companies look to add service and technologies needed to compete,” adds Prabhu.


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