Analysis

Evaluating M&A through a changing utility lens

A fresh look at M&A’s role in power and utilities

The US power and utilities industry stands at the center of converging forces that are poised to reshape traditional business models. As these forces converge, debate focuses on how much they will alter existing business models and when these disruptive changes will arrive. For some, “when” is now, for others, it may be months or years away. Whatever the timing, marketplace dynamics suggest a re-evaluation of current corporate strategies is in order for nearly everyone.

Among the strategic options open to power and utilities companies, mergers and acquisitions (M&A) stand out as one of the more compelling and potentially expedient paths for delivering value in the near-term and managing strategic risks to the business. However, M&A is generally not among the top options regulated power and utility companies consider, in part because they anticipate a variety of barriers, such as complex and challenging regulatory requirements and long approval timelines.

This guarded stance, however, may be outdated. The forces transforming the industry, combined with changing market conditions, are shifting the lens through which power and utility companies view M&A. And the new lens reveals expanded opportunities for win-win scenarios that benefit both customers and shareholders.

These changing marketplace dynamics suggest the time may be ripe for power and utility companies and their regulators to expand the dialogue about M&A, re-evaluating how it can help companies execute critical elements of corporate strategy, while simultaneously benefitting customers and shareholders.

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