ver the past four years the utility industry has seen 0 an unprecedented level of merger activity. This activity has been driven by an accelerated movement towards full deregulation within both the electric and gas industries. Many states, including Montana, Illinois, Connecticut, New York, and others have passed restructuring legislation that has either speclfically required the sale of generation assets, or because of such legislation, selected utilities have decided to sell their generation plants to offset stranded costs. As a result, each player within the industry is realizing that to compete one must decide upon a core competency and move quickly to create, through acquisition, the appropriate critical mass. These core competencies are focused either on the generation side or the distribution end of the business. A significant amount of assets have traded hands in each of these areas.
Transaction Type
Value/Number of deals Electric buying electric: $25 billiodl3 deals Electric buying gas:
$21 billiodl2 deals . . . one must decide upon a core competency and move quickly to create, through acquisition, the appropriate critical mass.
Recent Activity
Over the last four years, 64 trarisactions representing $84 billion of value have occurred. This represents on average approximately $1.3 billion per transaction, which in today's merger environment is not a large transaction. However, this average points to a highly fragmented industry in which there exist a very large number of small-to-medium-sized players. The activity can be broken into five main types of transactions: