Ecobee to be acquired by US-based Generac for $770 million

Wisconsin-based Generac Holdings is acquiring Toronto smart thermostat startup Ecobee for up to $770 million USD, contingent on the achievement of certain performance targets.

Generac is acquiring Ecobee to beef up its position in the connected smart home energy consumer market.

A pioneer in the smart thermostat market, Ecobee was founded in 2007 and is headquartered in Toronto.

At closing and subject to customary adjustments, Generac will pay $200 million in cash along with $450 million in common stock to the current equity holders of Ecobee. Additionally, upon achievement of certain performance targets between closing and June 30, 2023, the sellers may receive up to $120 million in additional shares of Generac common stock.

The acquisition is expected to close during the fourth quarter, after which Ecobee will continue to operate as a standalone subsidiary of Generac.

Founded in 1959, Generac Holdings Inc. was the first to engineer affordable home standby generators, along with the first engine developed specifically for the rigors of generator use. Generac manufactures the widest range of power products in the marketplace including portable, residential, commercial and industrial generators.

A pioneer in the smart thermostat market, Ecobee was founded in 2007 and is headquartered in Toronto. With a team of over 500 employees globally, Ecobee currently offers several Energy Star-certified thermostats and a suite of home-monitoring products.

Ecobee’s smart thermostats optimize heating and cooling systems to deliver energy savings for homeowners. Ecobee says its device is in more than two million homes in North America. The startup claims it has saved customers more than 20 terawatt hours of energy, which is the equivalent of saving enough energy to take all the homes in Los Angeles off the grid for an entire year.

More recently, the startup has moved into the area of home security, adding a smart camera with voice control, and wireless sensors that connect to its cameras.

In 2020, the startup was reported to be considering a merger with the special purpose acquisition company Canaccord Genuity Growth II Corp in order to go public.

RELATED: Ecobee aims to leverage Generac’s energy products, global presence post-acquisition

“We could have remained standalone, we could have done a public company offering, but we looked at it [and] getting to market faster, bringing this value to consumer[s] faster was the right thing to do for everyone and I’m super excited,” Stuart Lombard, Ecobee’s founder and CEO, told BetaKit in an interview. “Generac is committed to investing in Ecobee, in our employees in Toronto and Leeds, and it’s just a great outcome for all of us.”

Lombard referred to “creating impact at scale” as important to Ecobee. “One of the great things about Generac, not only is the technology assets they have, but they’re a global company, and so our ability to go global for example, with Generac, is going to be much faster and much easier than if we were trying to do it alone,” the CEO added.

In recent years, Generac has been changing its business model to also focus on clean energy products, solutions, and services. In 2019, the company began providing energy storage systems as a clean energy solution for residential use that capture and store electricity from solar panels or other power sources and help reduce home energy costs, while also protecting homes from shorter-duration power outages.

During 2020, Generac entered the grid services market by offering distributed energy optimization and control software that helps support the operational stability of power grids.

RELATED: Ecobee lays off 10 percent of staff, cancels new product line in COVID-19 market

“The strategic focus on expanding the connectivity of our products will broaden our monitoring capabilities and also enable the increasing utilization of this equipment as distributed energy resources as the nascent market for grid services expands over the next several years,” said Generac in the filing.

“Ecobee’s solutions are an important addition to Generac’s extensive residential energy technology portfolio,” said Aaron Jagdfeld, president and CEO of Generac. “Residential HVAC systems represent the largest energy-consuming device in the home today and Ecobee’s smart thermostats and sensors offer the most intelligent way to balance comfort with conservation.”

Jaddfeld added: “The ability to combine Ecobee’s cutting-edge technologies with Generac’s power generation, energy storage and energy management devices will allow us to create a clean, efficient, and reliable home energy ecosystem that will not only save homeowners money, but also help grid operators meet the challenges of an electrical grid under enormous stress by providing solutions to better balance supply and demand.”

To date, Ecobee has raised over $200 million in venture capital. It is backed by Amazon through the Alexa Fund and last raised capital in 2018, pulling in over $127 million CAD in Series C financing. Ecobee has also been supported by Canadian investors like Caisse de dépôt et placement du Québec (CDPQ), the Business Development Bank of Canada (BDC), Northleaf Capital Partners, and Relay Ventures.

RELATED: Ecobee raises $47 million and announces new exec hires

COVID-19 impacted Ecobee’s business in 2020, as the startup cancelled a new product line it had been developing over the past year and laid off 10 percent of its staff due to the economic impact caused by the pandemic.

Generac has executed a number of acquisitions that support its strategic plan, including the acquisition of Deep Sea Electronics Limited during the second quarter of 2021. Deep Sea is a designer and manufacturer of a diverse suite of flexible control solutions, focused on the global power generation and transfer switch space.

In 2020, Generac also acquired West Coast Energy Systems LLC, an industrial distributor; and Mean Green Products, a designer and manufacturer of commercial grade, battery-powered turf care products that provide quiet, zero emissions and reduced maintenance options as compared to traditional commercial mowers.

Generac also acquired Enbala Power Networks Inc. in 2020, one of the leading providers of distributed energy optimization and control software that helps support the operational stability of the world’s power grids.

UPDATE (01/11/21): This story was updated to include commentary from Ecobee’s Stuart Lombard.

Image source Ecobee via Glassdoor

Charles Mandel

Charles Mandel

Charles Mandel's reporting and writing on technology has appeared in Wired.com, Canadian Business, Report on Business Magazine, Canada's National Observer, The Globe and Mail, and the National Post, among many others. He lives off-grid in Nova Scotia.