North American power, utilities M&A increase in Q3 2013

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PwC US

Merger and acquisition (M&A) activity in the North American power and utilities industry increased in the third quarter of 2013 on a year-over-year and sequential quarter basis as dealmakers in the industry continue to consider opportunistic M&A to achieve strategic growth, according to PwC US’ quarterly deals snapshot, “North American Power & Utilities Deals: Q3 2013.”

“We saw a notable rise in deal activity in the third quarter and expect that activity to continue in future quarters as the hunt for yield and rebalancing of portfolios continues,” said Jeremy Fago, PwC’s U.S. power and utilities deals leader.

There were 12 power and utilities transactions greater than $50 million in the third quarter of 2013 compared with seven deals in the previous quarter and eight during the third quarter of 2012. While volume increased, the total value of deals worth $50 million or more declined to $4.6 billion from $12.5 billion in the second quarter of 2013, largely the result of one mega deal worth $10.4 billion in the second quarter. Excluding that deal, third quarter total value increased 115 percent over the second quarter’s total of $2.1 billion.

Strategic investors accounted for 72 percent of deal value in the third quarter of 2013 compared with 100 percent in the second quarter as the sector increased financial investor activity.

“While there has been continued interest from private equity for quality assets with stable cash flows and/or attractive value potential, we saw this investor group land more deals in the third quarter of 2013 compared to the previous quarter, and we expect this interest to continue going forward,” said Rob McCeney, PwC U.S. energy and infrastructure deals partner.

There were three renewable power deals in the third quarter of 2013.

Fago said he expects more.

“Renewables continue to attract investors seeking stable, predictable cash flows, and we expect the industry to continue its consolidation as thirst for yield and uncertainty around incentives remains,” he said.

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