Tech firm Stormgeo, with EQT as majority shareholder, wants to drive consolidation in the field of IT solutions for weather forecasts, route planning and optimization of elements such as ships’ fuel consumption, EQT tells WPO.
Equity fund EQT wants to use tech firm Stormgeo as a front runner in consolidation in the field of intelligent systems for weather forecasts, route planning and fleet optimization.
“This is an industry that calls for consolidation. Stormgeo has already acquired a series of companies during our ownership tenure, and these companies have been well integrated. There’s a lot more one can do, and we see Stormgeo as the natural platform for consolidation here,” says Rikke Kjær Nielsen, partner at EQT Partners.
More extreme weather, bigger climate requirements and strain on costs in shipping. These are the major driving forces that have made growth bubble among IT companies that specialize in weather forecasts, digital route planing and optimization of, for instance, ship fleets’ fuel consumption.
Stormgeo, with EQT as majority shareholder, currently delivers IT solutions to 12,000 ships.
This is an industry that calls for consolidation”
Rikke Kjær Nielsen, partner, EQT Partners
According to Stormgeo CEO Søren Andersen, the tech company has made around eight or nine acquisitions in recent years, but the company has appetite for more.
“They have been acquisitions in shipping, as we took over some activities from DNV GL, and when we acquired maritime map firm Nautisk. We’ve also bought part of a Brazilian company that is big in the Brazilian market with all kinds of weather information for TV stations and agriculture,” says Andersen.
“But we’d like to get further into our customers’ operations in other industries. This could mean that we’ll need to buy up competencies. This could be customers or market shares or technology. There are many opportunities. We see interesting, digital startups that are growing,” he adds.
Sees acquisition candidates in several places
Shipping accounts for 60 percent of Stormgeo’s revenue of NOK 700 million (USD 75.5 million), while the rest comes from the sale of solutions and services to offshore. Namely oil and gas, renewable energy such as offshore wind turbines and other sectors.
A revenue of NOK 700 million at Stormgeo, which according to EQT Partners is a “super profitable company”, though the owner declines to list numbers for the bottom line, is not enough for the majority shareholder.
“We see acquisition opportunities in the shipping business and in our Weather Insights business area, which provides products and services to other sectors, such as renewables,” says Nielsen, who declines to comment on EQT’s return requirements for the Stormgeo investment or to set a time frame on the fund’s ownership period.
EQT has been majority shareholder since 2014.
Growth despite difficult year
According to Andersen, Stormgeo is facing structural tailwinds in the business, which, despite a year with coronavirus and turbulence in the global economy and in shipping, has noted growth in both business areas: shipping and offshore.
“In shipping, authorities are setting requirements for more reporting, for more efficiency in the sector, and there is a general pressure on costs, which means it’s good to be able to reduce energy consumption and carbon emissions. So climate change is a big driver in our business,” says Andersen.
StormGeo
Stormgeo is far from alone in the market for weather forecasts and systems for route planning and fleet optimization.
One of the major players in the market is Japan’s Weathernews, which has 1,000 employees around the world. The company is big in weather forecasts and route planning.
Another player is Denmark’s DMI.
A smaller player, Coach Solutions, has also begun to stir. Coach Solutions was acquired this summer by Norwegian tech group Kongsberg Digital. Seller was dry bulk operator Clipper.
Coach Solutions, headquartered in Copenhagen, keeps its financial figures close to its chest, but according to CEO Anders Bruun, the company has been in constant growth since 2016 and it now collects data from 900 ships. Its top line grew 35 percent in 2019 to USD 0.5 million.
“Coach has just been acquired by Kongsberg Digital, and it has as such already participated in the consolidation of the market. We are of course keeping an eye out for all possibilities of making further consolidation, while we’re also focusing on helping as many shipping companies as possible,” says Bruun.
