Ensuring ESG Success After the M&A Transaction
This blog post is the final in a series co-authored with EPOCH Pi, a Certified B Corp investment bank that helps purpose-driven clients prosper by combining traditional investment banking services with cultural integration tools that identify values-aligned partners.
While ESG was once an afterthought to M&A deals just a few years ago, there is now little doubt that ESG factors contribute to the creation of value and to the risk management required to preserve value after a deal is finalized.
The past two years have made clear that businesses can’t ignore environmental or social factors, nor the various stakeholders important to a transaction. COVID-19 has sharpened the focus on the importance of ESG considerations, calling attention to how companies are prioritizing the health, safety and wellness of their employees, customers, communities and supply chains.
Instead of looking only at financial statements and growth plans, dealmakers are increasingly integrating ESG issues into consideration. The current disruptions are stress-testing how effectively companies have integrated ESG into their business strategy to drive resilience, adaptability and long-term sustainability. According to recent reports, nearly 90 percent of M&A targets are acquired only after a thorough review of their performance by analyzing ESG factors.
After ESG factors are reviewed during the due diligence process and evaluated when negotiating certain aspects of the deal, there are a few different ways to ensure ESG success after both parties sign on the dotted line.
ESG AND M&A BEST PRACTICES
By their nature, mergers and acquisitions produce a transition period, and with that can come uncertainty and restructuring, which has the potential to cause a significant threat to ESG programs.
During M&A integration, it is important to keep ESG considerations top of mind when combining resources, systems, processes and more — especially if there are significant differences in company cultures and policies. Failure to do so can cause confusions and risk alienating key stakeholders and employees.