The Southern-AGL merger has gained much of the attention in the utilities sector, but overall M&A activity within the industry earlier this year was lagging well behind the mammoth dealmaking going on elsewhere in the economy.
An Ernst & Young (EY) report indicates that global M&A fell to a six-year low of US $50.9 billion in the global power & utilities (P&U) sector for the first half of 2015.
The Asia-Pacific P&U saw the most robust M&A action in the second quarter with about $9.3 billion in deals, nearly 90 percent of that happening in China. Ernst & Young’s report indicates that India, Indonesia, Pakistan and Japan are ripe for potential deals, while valuations are strong in Europe, especially in the renewables arena.
Second-quarter dealmaking in the European and Americas P&U sectors fell 50 percent and 13 percent, respectively, quarter over quarter.
The year started out strong, but second-quarter global M&AS in P&U included only 96 deals worth about $21.2 billion.
“Despite the deal slowdown, valuations remain strong for many assets, particularly in renewables, T&D and generation,” Matt Rennie, EY’s global power and utilities transaction leader, said in a statement. “During the second half of the year we expect to see M&A rebound as companies respond to the sector’s ongoing transformation, particularly regulatory reforms and electrification in emerging markets.”
The study does not include the recently announced plan by Atlanta-based utility giant Southern Co. to acquire AGL Resources Inc., the natural gas-focused utility also headquartered in Atlanta. That deal is reportedly worth $12 billion in total enterprise value.
Economy wide, M&A activity both in the U.S. and globally is surging toward an all-time high, according to Reuters. Domestic M&A totaled $1.4 trillion as of August, while global dealmaking was already close to the $3 trillion peak reached in 2007, according to reports.
Among those megadeals include Berkshire Hathaway’s $30 billion buyout of Precision Castparts.