Management: Merge,. Divest, or Both?

Fortnightly Magazine - June 1 1996
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s Merger Magic

"Occasionally, yes. There are obviously some fairly easily measurable synergies in some mergers. . . . The real issue, however,

is not whether there are savings. The real issue is could those savings have been obtained without concentrating the economic power that goes with a merger?

"Generally, we've dealt with it with judgment. That is, somebody in authority, usually the antitrust authorities or a judge, makes a decision with the two principals that guide the decision. . . . There is a general bias against concentrated economic power in this society, and therefore, if there are two firms merging with any indication of monopoly power at all, that deserves a very careful scrutiny. And the second bias overlaps the first one. And that bias is: You don't approve the merger if the gains can be accomplished in any other way without the merger."

s Debt Service

"Two things are going to raise the cost of generation a little. For the first time, the history of the industry and the real risk of making these long-term capital investments are going to fall on the investor. . . . One of the great defects of the regulatory system was it drafted a group of amateurs called ratepayers and made them the principal risk-bearers for these very durable capital-intensive pieces of equipment. And they have had to pay a very big price for being drafted in that role.

Yes, there will be an increase in the cost of money for generators."

s Hard Numbers

"I don't know. I hear these statements that we're going to end up with a small oligopoly (em a couple hundred, with probably 15 or 20 of them being large and the rest of them tailing off with smaller sizes to meet special needs.

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