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ESG: A Cornerstone of Modern Mergers and Acquisitions (M&) Strategy

The relevance of Environmental, Social, and Governance (ESG) as a framework for measuring corporate sustainability performance has experienced a transformation in its relevance. Nowadays, ESG factors are becoming essential in the realm of mergers and acquisitions (M&A). Their role has surpassed mere compliance or public image concerns, evolving into value creation, risk mitigation, and the seizing of new opportunities throughout the entire M&A process.



Leaders in corporate and private equity now acknowledge that ESG factors can significantly influence value in M&A. Recently, ESG has shifted from a peripheral issue to a central component of M&A strategy. This change is backed by progress in data gathering and evaluation, and a deeper comprehension of ESG principles, allowing M&A leaders to better incorporate ESG factors into their decision-making processes.


Findings from the Deloitte's 2024 ESG in M&A trends survey illuminate how ESG considerations are reshaping strategies at every stage of the M&A process, equipping dealmakers with superior data, enhanced measurement instruments, and a more profound insight into ESG's impact on valuations and portfolio management, ensuring alignment of investment strategies with broader sustainability objectives. Ongoing trends in ESG and M&A as revealed in the research indicate that:


More than half (57%) of the surveyed entities now employ well-defined metrics for assessing ESG, a rise from 39% in 2022. This enhancement in data and evaluation tools has bolstered confidence among dealmakers, with 78% displaying high confidence in evaluating the ESG profile of a target.

Despite the focus on ESG in deal-making, its integration into Post-Merger Integration (PMI) practices remains restricted.


Merely 12% of entities have a dedicated approach to managing ESG in PMI. The financial services sector and PE firms are spearheading the development of these capabilities, recognizing the lasting value and risk mitigation potential of ESG-focused PMI strategies.


Approximately three-quarters (74%) of companies evaluate their acquisitions through an ESG lens, and 67% factor in ESG in their divestment strategies. The financial services industry and PE firms are particularly proactive in utilizing M&A to enhance their ESG profiles, with 82% of PE respondents devising strategies to boost ESG through acquisitions and divestments.


Today, we acknowledge how ESG has emerged as a foundational element of contemporary M&A strategy, influencing every phase of the deal life cycle, from initial target selection and valuation to integration and ongoing portfolio management. With ESG considerations increasingly ingrained in the M&A process, their role in driving value and fostering sustainable growth will only grow further.


The ultimate gauge of ESG's integration into M&A will be when its inclusion is viewed as standard practice rather than a noteworthy consideration. This continuous evolution underscores the indispensable role of ESG in shaping the future not only of M&A but of every aspect of the business landscape, enabling companies to generate long-term value while tackling crucial environmental, social, and governance challenges.


To access the full findings and stay updated on the study, we recommend reading the complete report.



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