Merger commitments made by the seller and buyer are key contributors to the public interest. Merger commitments are intended to highlight the unique benefits of the proposed transaction and protect customers from potential risks created by that transaction. As consolidation in the industry has increased so has the prevalence and scope of merger commitments and conditions. This is due to a variety of factors including:
- pressure on costs and rates;
- the importance of economic maintenance and development;
- changes in financial markets and acquisition financing;
- the “Enron effect”;
- more financial and non-U.S. buyers;
- more contested proceedings;
- sophisticated and creative positions from intervenors; and,
- more industry experience creating a “layering” of commitments and conditions in some mergers.
Merger commitments and conditions fall into several categories including: guaranteed customer benefits, customer “hold harmless” provisions, operations and customer service, financial and ring-fencing, ratemaking, accounting and tax, employees, local management, other local considerations, energy policies, social policies, affiliate interests and codes of conduct, and competition. While intervenors in some transactions have sought additional commitments, most Commissions have avoided imposing conditions on a merger that would disrupt the balance of customer, shareholders and other interests and cause a transaction to be aborted. The importance of understanding a Commission’s policies and precedents, and the interests of other stakeholders cannot be underestimated in a merger. Precedent in the industry provides prospective buyers and sellers with a “road map” for successful mergers.