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Abandoned deals: the merger and acquisition process in the electricity and gas industry

Author:
ten Brug, Hans, Rao Sahib, Padma
Source:
Energy policy 2018 v.123 pp. 230-239
ISSN:
0301-4215
Subject:
electricity, issues and policy, oil and gas industry, ownership
Abstract:
High profile deals emphasize the costs of the merger and acquisition (M&A) process particularly when deals fail before closure. However, beyond anecdotal evidence, we do not know why some M&A deals in the electricity and gas industries are abandoned. We analyze a sample of over 5000 M&As in the electricity and gas industries. The three most important factors affecting M&A abandonment are if the acquirer engaged in a divestiture at the same time, whether the target firm was publicly owned, and if the acquirer already had a toe-hold (part ownership) in the target firm at the time of the M&A deal. An M&A deal is 10.17% less likely to be abandoned if the acquirer engaged in a divestiture at the same time. An M&A involving a publicly owned target firm is 9.87% more likely to be abandoned. Lastly, an M&A in which the acquirer had a toe-hold in the target company is 7.87% more likely to be abandoned. Our findings show that policy makers and practitioners should be aware that the M&A process is affected by often over-looked deal or firm specific factors.
Agid:
6144690