“Do Mergers and Acquisitions Improve Efficiency: Evidence from Power Plants”
Mert Demirer (Massachusetts Institute of Technology) and Omer Karaduman* (Stanford University)
Our comprehensive study on the US power sector in the last two decades reveals the notable impact of mergers and acquisitions on power plant efficiency. By examining extensive operational data and ownership changes across various generating units, we found an average production efficiency boost of 5% following acquisitions. This improvement is predominantly due to better operational practices rather than significant capital investments, leading to higher output, fewer disruptions, and less emissions. While these findings underscore the positive effects of M&A in the power sector on operational efficiency, it’s important to remember that we did not assess the impact on prices or consumer welfare. This research offers critical insights for the energy industry and policymakers, highlighting the importance of strategic operational improvements for enhancing performance and sustainability.