Skip to main content

Positioning Your Utility to Maximize Selling Price in Today's World of Acquisition Mania

The full text article is not available for purchase.

The publisher only permits individual articles to be downloaded by subscribers.

or click here to sign up for a free trial

Abstract:

If state and federal regulations are overwhelming, and you have determined to exit the utility business due to diminishing bottom lines, what actions can you take to maximize the selling price of your utility? For many, divestment of responsibility and liability for owning and operating a utility is an attractive option. This paper discusses administrative actions to enhance the value of your utility system to a prospective buyer.

In recent years, many large investor owned utilities have pursued aggressive policies of acquiring small privately and publicly owned systems which lack financial, managerial and technical resources not economically available to the utility. To the extent that a buyer has access to sound financial, operating and capital investment data, the buyer can make an informed decision as to the price that it would be willing to pay and an assessment of the ease of ownership transition. In cases where reliable data is not available, a purchaser would be inclined to discount the purchase price.

For example, a prospective buyer would be interested in whether a utility has a current inventory and adequately maintained property records that (1) present the cost of assets in service by utility account classification, (2) accounts for retirements, and (3) includes a description of each asset. Such information is valuable to a buyer whose rates are regulated by a state agency since asset cost forms the basis for earning potential.

Other book and record keeping documents include a (1) work order system, that properly records project costs associated with capital construction and overhead costs, (2) a maintenance management system showing frequency and adequacy of repairs, and (3) an environmental assessment showing no hazardous waste sites on the property.

A prospective buyer may also consider paying a premium if the system to be acquired has potential for customer growth. For example, it would benefit the system to be acquired to expand its certificated service area as an added incentive to the purchaser. Other incentives may include owning a surplus and/or acquiring additional water rights or increasing rates to recover the full cost of rendering water service, thus reducing any adverse publicity to a new owner.

Such actions may be achievable to the existing owner at moderate cost and are recoverable as a cost of providing service by a purchaser. To the extent that the transaction reduces the risk to a purchaser and reduces barriers, the value is increased.

Document Type: Research Article

DOI: http://dx.doi.org/10.2175/193864702785301367

Publication date: January 1, 2002

More about this publication?
  • Proceedings of the Water Environment Federation is an archive of papers published in the proceedings of the annual Water Environment Federation® Technical Exhibition and Conference (WEFTEC® ) and specialty conferences held since the year 2000. These proceedings are not peer reviewed.

    WEF Members: Sign in (right panel) with your IngentaConnect user name and password to receive complimentary access.
  • Subscribe to this Title
  • Membership Information
  • About WEF Proceedings
  • WEFTEC Conference Information
  • Ingenta Connect is not responsible for the content or availability of external websites
wef/wefproc/2002/00002002/00000004/art00040
dcterms_title,dcterms_description,pub_keyword
6
5
20
40
5

Access Key

Free Content
Free content
New Content
New content
Open Access Content
Open access content
Subscribed Content
Subscribed content
Free Trial Content
Free trial content
Cookie Policy
X
Cookie Policy
Ingenta Connect website makes use of cookies so as to keep track of data that you have filled in. I am Happy with this Find out more