Business & Money

Some big utilities are looking to get bigger.

When Morgan Stanley last October asked 30 of the top 50 utility chiefs whether they expected to merge with another company in the next two years, two-thirds of them said they did. Asked whether they expected to merge within the next five years, the utility chiefs unanimously said yes.

"The big will get bigger and the strong will get stronger. We fully believe that the winners will get differentiated," said Jeff Holzschuh, managing director, and head of the global energy and utilities group at investment bank Morgan Stanley.

Speaking at the Exnet Utility M&A Symposium in late January, Holzschuh said merger considerations, like utility balance sheet considerations, are following a "back-to-basics approach," only in investment banking parlance it's "M&A 101."

"M&A 101 [is] taking synergies out, providing revenue opportunities, cheaper access to capital-all the things that you think of M&A as a tool to do," Holzschuh said.

But the success of mergers will depend on how the market understands strategic combinations and how that combination will play a role in growth, Holzschuh explained.

Of course, growth, he admitted, has been a taboo word in the industry for the last 18 months. But as the general market begins to rebound, he predicted growth would again be in investor's sights. Also, experts believe that some utilities exhibiting anemic 1 to 2 percent organic (internal) growth will need to explore other sources of potential growth.