The FINANCIAL — Global power and utilities deal value reached a five-year high of US$75.5b in the third quarter of 2015 and a growing appetite for transactions points to an active market ahead, according to EY’s Power & Utilities Capital Confidence Barometer.
Survey results show 81% of executives see the global economy as improving — up from 51% a year ago — and this is translating into more M&A activity. Additionally, 58% of companies now plan to pursue an acquisition in the next 12 months and 39% already have three deals in the pipeline.
Geographically, the developed markets of the US, UK, Germany and Australia were identified as preferred investment destinations for utilities. EY’s Power transactions and trends Q3 2015 shows how this trend is already underway with the US accounting for US$57b of total deal value in Q3.
Matt Rennie, EY Global Power & Utilities Transactions Leader, says:
“Utilities are concentrating on growth opportunities that enable them to keep pace with changing customer demands and provide them with advanced capabilities. And we’re finding that cross-sector collaborations are becoming commonplace — particularly with technology providers. In fact, 55% of survey respondents are currently planning an acquisition outside the sector.”
While the appetite for deal-making continues to grow, 78% of respondents canceled or failed to complete a planned acquisition in the last year. These utilities cited regulatory or anti-trust reviews and competition from other buyers as the top challenges to completing deals.
Rennie says: “Traditional utility companies face a league of disruptive forces in today’s market. Companies are waiting for the right deal and are more willing to walk away when it’s not the right fit. Undertaking strategic M&A is more important than ever as companies manage widespread sector transformation.”
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