AWWA JAW69179

This research investigated merger and consolidation in the water industry to gain insight into the causes driving these activities. An economic model was developed to analyze data from more than 6,000 mergers of community water systems in six midwestern states. The model considered such variables as number of water quality and monitoring violations, whether or not a system already purchased water, and system ownership (public versus private). Small water systems that were acquired were more likely to have violated the Safe Drinking Water Act (SDWA). Publicly owned firms were less likely to be acquired, perhaps because of the high political costs associated with selling government assets. Systems that purchased water and thus already had interconnected infrastructure also were more likely to merge. Merger has not been fully explored as a mechanism to increase regulatory compliance. These findings suggest that policies that lower the political, regulatory, and physical cost of mergers may help make it a more effective tool to boost SDWA compliance. Includes 28 references, tables.