M&A Advisor Tip: ESG Diligence on the Rise in M&A

Companies that are able to showcase their Environmental, Social and corporate Governance (ESG) capabilities stand to gain a competitive advantage and make themselves more attractive to potential acquirers.

ESG issues cover a wide range of corporate practices that could include everything from environmental stewardship, health and safety policies, employee well-being, community support, to corporate culture issues.

In recent research from Datasite, 84% of dealmakers rated ESG as an “important/very important” M&A due diligence consideration. And 78% have terminated M&A discussions due to concerns about a target company’s ESG credentials.

We are definitely seeing buyers pay greater attention to environmental, social and corporate governance issues in our sell-side M&A engagements. From a buyer perspective, misalignment in these areas reduces valuation and increases integration challenges and costs. As a result, we are incorporating more ESG analysis into our company valuations and exit planning assessments, and making more of these types of disclosures in our offering memorandums.

For advice on exit planning or selling a business, contact Al Statz in Exit Strategies Group’s Sonoma County California office at 707-781-8580 or alstatz@exitstrategiesgroup.com.  Exit Strategies Group is a partner in the Cornerstone International Alliance.