Mid-market divestitures represent majority of M&A activity
NEW YORK, May 7, 2013 ― The North American power and utilities mergers & acquisitions (M&A) market experienced an uptick in both volume and value in the first quarter of 2013, compared to the same timeframe a year ago, as strategic investors looked to divest non-core assets, according to PwC US’ quarterly deals snapshot – North American Power Deals: Q1 2013.
“While deal volume and value decreased from the fourth quarter of 2012, the sector has rebounded from the levels of M&A activity that we saw in the first quarter of 2012,” said Jeremy Fago, PwC’s U.S. power and utilities deals leader. “This quarter, we saw hybrid power companies with both regulated and non-regulated assets divesting merchant exposure.”
In the first three months of 2013, there were nine power and utilities deals with values greater than $50 million, totaling $3 billion, representing a 33 percent increase in deal value compared to the first quarter of 2012, which had four transactions totaling $2.3 billion. Deal volume also increased 125 percent over the same period in 2012.
Average deal value continued on a recent downward trend, resulting from the lack of mega deals in the quarter. “We expect deal activity to pick back up as the significant consolidation that occurred over the past two years is further integrated,” added Fago.
Strategic investors continued to make up the majority of M&A activity, accounting for 57 percent of deal volume in the first quarter of 2013. However, financial investors may remain active through the rest of the year, as they look at the sector for attractively priced assets.
The sector also saw an increase in cross-border activity compared to the same time period in 2012, with cross-border representing three transactions totaling $723 million, or 24 percent of deal value, in the first quarter of 2013. “While investor activity from Europe and Asia has diminished, we continue to see interest in U.S. assets from Canadian investors,” added Rob McCeney, U.S. power and utilities transaction services partner with PwC.
Contrary to the fourth quarter of 2012, which experienced heightened alternative deal activity (representing 40 percent of deals worth more than $50 million) due to an uptick in wind transactions with the expiring, and subsequently extended, production tax credit, alternative energy sources accounted for only two deals in the first quarter of 2013.
PwC provides assurance, tax and advisory services to the power and utilities industry. Using deep industry experience, PwC helps top power and utilities companies gain operating efficiencies across the business value chain, from fiscal integrity and regulatory issues to increased customer service and talent management.
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