Not in all cases, or for all stakeholders. Here’s why.
Prescott Hartshorne is a managing director and James Coyne is a senior managing director for FTI Consulting’s electric industry strategy practice. Contact Coyne at james.coyne@FTIConsulting. com.
The past 10 years have seen more than 50 utility mergers in the United States. Punctuated by the recent National Grid/Keyspan and FPL/Constellation announcements, the industry appears at another inflection point in its march toward consolidation.
Given the cost and complexity of such mergers, these events indicate that the industry perceives substantial benefits from consolidating. But what is the track record, and does the regulatory and strategic landscape suggest these mergers are beneficial?
Utility mergers are rationalized based on growth, business scale or cost synergies, but an objective analysis of the impacts on utility customers, rates, management, employees, service quality, and financial performance has not been performed. Using mergers consummated to date, let us examine the evidence for the benefit of prospective merger partners, regulators, and other utility stakeholders.
While recent studies point to a mixed track record for corporate mergers from a shareholder perspective, we have taken a more holistic approach. Specifically, we have researched the effects of a group of six mergers on shareholders, employees, and customers over a period of five years since their respective merger closing dates.