When assessing the market of an acquisition target, allcustomers are not equal, Columbia Energy Group Chairman Oliver G.Richard told a merger and acquisition symposium this week.

For instance, the customers of an older utility just moving intothe competitive arena could decamp to competing suppliers. “Why buya company whose customers are leaving,” Richard asked. Of course,the customers of Columbia Energy don’t fit in that category. “Ourcustomers number more than 300,000 customers hard won throughcompetition and 350 employees with the intellectual capital” toservice those customers. That customer base “already is equivalentto what we might have obtained through the acquisition of a smallenergy company….at less expense perhaps than a traditionalacquisition,” Richard added.

In recent years Columbia has avoided “the urge to merge at allcosts. We’ve walked away from deals because the premium to be paidwould have been too high and the value returned would have been toolow.”

Listing lessons learned for the Twelfth Annual Utility M&ASymposium in New York City, Richard stressed speed andcommunication once the deal is done. The acquiring company should”put in place a dedicated team to integrate employees and assetsquickly and communicate on a personal level completely andquickly.” Looking at a prospect, a company should “learn theregulatory environment as soon as possible.”

Richard believes “Consolidation will continue to occur – but inmore and varied forms. Competition and consolidation are makingcritical mass more critical than ever before…..There are some4,000 local utilities in the United States. It’s reasonable toassume each of them is not equally skilled or has the scale neededto perform all facets of the energy business….that alone makesfurther consolidations inevitable.”

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