Dial M for Merger
increase the set of potential utility acquirors by removing impediments to foreign companies and financial and other non-utility domestic companies.
With the need for utility companies to create value for their shareholders, corporate managements will seek to develop business combinations that can be structured to achieve attractive financial prospects for shareholders consistent with both the requirements of the marketplace and acceptable level of regulatory/implementation risk. An improved economic and financial environment, which appears to be in progress, and the potential for regulatory clarity will make it more practical to achieve these objectives.
Results of Morgan Stanley's corporate executive survey.
In late 2003, Morgan Stanley conducted an informal survey of utility CEOs and CFOs. The results are consistent with the view that corporate M&A activity will begin to pick up significantly. For example, when asked how many of the 50 largest electric utilities would remain independent for the next five years, 60 percent of the utility executives thought that about 40 would remain independent and almost all of the other executives thought that only about 25 of the top 50 would remain independent in five years. In response to another question, 75 percent of those responding thought that their company would be involved in a merger in the next five years. Also, 75 percent of those responding responded that their company would be the acquiror. Of course, developments on the business, regulatory, and economic and financial fronts will influence what actually occurs, but these are the views from those that make it happen. -K.M.
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