2011 Merger and Acquisition activity in the Electric, Gas, Water & Sanitary Services

July 23, 2012 12:29 by Capital Advisors in M&A  //  Tags: ,   //   Comments (0)

David Patterson | April 26, 2012

The total number of utility deals returned to a more normal level of 204 announcements in 2011, up from a low of 135 in 2009 (see Graph 1).  However, the 2011 total value of the deals, $22.9 billion, and the 2011 average value per deal, $112.3 million, have not returned to the pre-Great Recession levels (see Graph 2 and 3).

Total deal values in 2011 did not return to pre-Great Recession levels for several reasons.  The market multiples continued to be “soft,” and confidence levels are still relatively low.  The Price to Earnings (“P/E”) multiple was in excess of 20 through 2009, but hovered around 15 times earnings in 2011.  The Earnings before Income Taxes, Depreciation and Amortization (“EBITDA”) multiple has rebounded from a low of 6.9 times EBITDA to a respectable 9.2 times, but it’s still lower than 2007 and 2008.  Lower multiples and lower confidence tend to put some mid to large utilities on the sidelines.  So now we see, large companies building cash and waiting for a rebound in confidence.

                              Graph 1                                                             Graph 2

 

 Source: Mergerstat                                                                    Source:  Mergerstat

 

                               Graph 3                                                                  Graph 4

  Source: Mergerstat                                                                    Source:  Mergerstat

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