2 minute read 8 May 2019
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Confident power and utilities executives push M&A intentions to record high

A stronger power and utilities economy sets the scene for a robust M&A environment, though utilities may face tougher competition for assets.

Sixty-three percent of global power and utilities (P&U) executives expect to pursue M&A in the next 12 months, according to the EY Global Capital Confidence Barometer. P&U executives are confident of economic growth, with 94% of Capital Confidence Barometer respondents expecting global economic growth to improve and 92% anticipating growth within the sector. These figures show a remarkable improvement from this time last year, when results were 76% and 61%, respectively.

This confidence is driving an expected uptick in P&U mergers and acquisitions activity. Sixty-three percent of executives say they will actively pursue M&A in the next 12 months — a record high for the sector since the first Barometer in 2010 — and 83% see an improving market for dealmaking in the P&U sector.

Expected M&A

63%

of P&U executives expect to pursue M&A in the next 12 months.

The desire to transact comes as the sector transitions from a traditional landscape to a system that will be defined by a new, changed market and technological conditions. Dealmaking in 2019 will be shaped by P&U companies’ decisions around the role they intend to play in this new ecosystem.

Almost all respondents (97%) say they plan to make significant investments in technology this year, with improving customer experience (24%) and creating new services or products (20%) representing the two main focal areas. Another 20% of those surveyed indicated they will make use of automation and artificial intelligence to increase personalized service offerings and customer service.

Technology investment

97%

of P&U executives expect to make a significant investment in technology this year.

As new technology startups emerge, this may become a key focus of M&A. Seventy-two percent of respondents indicated technological innovation would have a very influential impact on their companies’ deal strategy.

To successfully implement an innovation strategy, companies need support from investors, regulators and boards of directors. P&U executives should consider working closely with stakeholders, including regulators, to legislate changes that allow them to pursue new, commercially competitive business models and innovative funding mechanisms.

Summary

Confidence in the power and utilities economy has resulted in a record high number of companies saying they will seek M&A in the next 12 months. Competition for assets is likely to increase and the growing valuation gap between buyers and sellers may challenge deals.

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