Stimulus Funds and Smart Grid Deployments Play a Critical Role in Growing Value and Volume of Mergers and Acquisitions

Mergers and acquisitions in the utility and energy generation sector are growing, according to a new quarterly report from PriceWaterhouseCoopers LLP. And stimulus funds and Smart Grid technology deployments are playing a significant role. Deal value increased 14% in the second quarter of 2010 over the previous quarter and the number of deals valued at more than $50 million grew by 38% over the first quarter of 2010 and the final quarter of 2009. "Stimulus funds and Smart Grid implementations are a big part of the mix for many utilities, and certain acquisitions and divestitures will play a vital role in determining the potential success or potential failure of utilities as they adjust to a Smart Grid world," said John McConomy, U.S. power and utilities transactions leader for PriceWaterhouseCoopers. He also noted that while it's hard to tell if recent activity will prove to be a lasting trend, "... a wave of industry consolidation might be building, especially if the recently announced deals reach the finish line. If those deals receive timely regulatory approvals, the industry should anticipate more M&A activity on the regulated side."

Quick Take: We're not surprised at the finding that mergers and acquisitions are growing in the utility and energy sector — we've been covering them. But the overall "cautious optimism" expressed in the PriceWaterhouseCoopers report, and the recognition of the critical importance of stimulus funds and Smart Grid deployments, is welcome news.

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