The Next M&A Wave: If mergers are once again a potential strategy for accomplishing growth objectives, the previous round of transactions offer several lessons.
Over the last 15 months, much of the utility sector's lost market capitalization gradually has been restored. Some companies have, in fact, soared to all-time valuations on the strengths of distinguishable strategies and strong execution. However, as a whole, valuations in the utilities are again at levels inconsistent with their long-term history. Relative utility P/E multiples against the S&P Index are more than 30 percent above historical norms and absolute multiples for integrated electric companies average approximate 15x.
Keeping these lofty valuations means producing requisite earning growth. Is the time now ripe for breaking the consolidation dry-spell? If so, how should companies pursue this next wave to assure success?