Dive Brief:
- Large utility deals in the United States are taking a significantly longer time to complete than mergers in other sectors, according to data analyzed by Bloomberg.
- Deals in excess of $3 billion are averaging 316 days to work through complicated regulatory proceedings, as consumer advocates use the arena as a way to win concessions.
- Despite the delays, data from PwC shows North American utility mergers on the rise last year, with the number of deals rising (although deal size declined somewhat).
Dive Insight:
Large utility deals are taking more than 300 days to complete, making it the slowest sector for companies seeking acquisitions in excess of $3 billion. Bloomberg analyzed data from the last decade and found the sector to be dramatically slower than all others. Communications mergers of the same size take less than 200 days to complete, with technology and finance deals right around 150 days.
Long regulatory processes and consumer advocates pushing for perks and protections have slowed the process. Watchdog groups see the deals “as their one chance to get something back” Edward Jones analyst Andy Smith told Bloomberg.
One prime example of that is Exelon's bid to acquire Pepco Holdings. The companies appeased regulators in Virginia, New Jersey, Delaware and Maryland. But in the District of Columbia, the $6.9 billion deal has been slowed. The city rejected the deal, but it now appears Exelon is working to offer more guarantees to residents and the city regarding reliability and clean power.
Earlier this year, PwC released data showing the total volume of North American power and utilities deals rose 57% in the fourth quarter of 2014 over the previous quarter, from $11.1 billion to $17.4 billion. but average deal size declined about 15%, down to $790 million, the firm said.
“In 2014, deal activity ended on a high note in the power and utilities industry, building on the increase in both deal volume and deal value that was seen throughout the year," said Jeremy Fago, U.S. power and utilities deals leader for PwC.
