Do acquisitions by electric utility companies create value? Evidence from deregulated markets

Jo Kishimoto, Mika Goto and Kotaro Inoue

Energy Policy, 2017, vol. 105, issue C, 212-224

Abstract: In the early 1990s, the United Kingdom (the UK) initiated widespread reforms in the electricity industry through a series of market liberalization policies. Several other countries have subsequently followed the lead and restructured their electricity industry. A major outcome of the deregulation effort is the spate of takeovers, both domestic and global, by electric utility companies. With the entry of new players and increasing competition, the business environment of the electricity industry has changed dramatically. This study analyzes the economic impact of mergers and acquisitions (M&As) in the electric utility industry after deregulation. We have examined acquisitions that took place between 1998 and 2013 in the United States, Canada, the UK, Germany, and France. Although previous studies showed no evidence of a positive effect on acquiring firms through M&As, we find that acquisitions by electric utility companies increased the acquiring firms’ share value and improved their operating performance, primarily through efficiency gains after the deregulation. These results are consistent with the empirical evidence and implications presented by Andrade et al. (2001) that M&A created value for the shareholders of the acquiring and target combined firms.

Keywords: Mergers and acquisitions; Electric utility; Deregulation; Shareholder value; Firm performance (search for similar items in EconPapers)
JEL-codes: G34 L21 L94 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:105:y:2017:i:c:p:212-224

DOI: 10.1016/j.enpol.2017.02.032

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