Utility M&A Slows But Plenty of Takeover Bets Still Available

From the time Thomas Edison threw the first switch and Alexander Graham Bell completed the first phone call, essential services companies have been on a relentless quest for scale. And since such businesses rarely fail, the primary method has been mergers and acquisitions.

Some years, the pace has been frenetic as management teams have attempted to capitalize on favorable shifts in regulation, a low cost of capital and/or available assets at good prices. Other times, activity has slowed to a crawl as would-be acquirers have balked at sky-high valuations for available targets, shifting investor preferences and increased scrutiny by regulators.

At their core, however, the businesses of delivering reliable electricity, heating, natural gas and water are all about scale. Mainly, larger companies are better able to finance the critical capital spending needed to consistently improve network and service quality, while standing up against market and regulatory pressures.