Repeatable M&A: Creating a Value Chain Reaction

Deck: 

How building capabilities for repeated M&A can increase shareholder value.

Fortnightly Magazine - April 15 2002
This full article is only accessible by current license holders. Please login to view the full content.
Don't have a license yet? Click here to sign up for Public Utilities Fortnightly, and gain access to the entire Fortnightly article database online.

Despite significant recent upheavals, the energy industry's long-term consolidation is likely to continue. Many companies appear to be moving towards, or have announced, consolidation strategies in their preferred areas of the industry. (see Table 1)

Nonetheless, PwC Consulting's analysis shows that, as in most other industries, few energy acquisitions in the last few years have created above average value. Why? It appears that Wall Street has perceived some deals from the start as not creating value, because of insufficient or unclear strategic rationales, and/or because the Street did not believe that the companies could or did execute those deals well. In PwC Consulting's analysis of 50 recent M&A transactions, 30 were in this category, including NiSource's acquisitions of both Bay States and Columbia. The Street saw 11 other transactions initially in a positive light, but found that implementation was more problematic than expected-for example, although post-announcement share prices performed better than the S&P utility index, National Grid's NEES and EUA deal ultimately led to share price performance below the index, perhaps due to difficulties meeting merger synergy expectations. Only nine transactions have been seen as value-creating from two weeks before deal announcement, through a year after announcement. The market is tough on M&A transactions; expectations, once set, need to be met. 

This full article is only accessible by current license holders. Please login to view the full content.
Don't have a license yet? Click here to sign up for Public Utilities Fortnightly, and gain access to the entire Fortnightly article database online.