Trend: Organizations Grow a Social Conscience

Organizations are making environmental, social and governance (ESG) initiatives a top priority. As such, 2022 M&A will not necessarily revolve around those efforts, but it will place them at the forefront.

“Investors are likely to regard ESG goals as a critical element in building a more sustainable business that can better adapt to potential market shifts,” KPMG says.

A PwC survey found that 79% of global investors say ESG risks represent an important factor in investment decision-making.

“While not undertaken solely with M&A in mind, corporate ESG initiatives are getting more scrutiny in deals from both a risk and an opportunity perspective,” PwC says.

CEOs stand at the helm of the ESG 2022 M&A trend, too, according to Willis Towers Watson. These executives are putting more emphasis on driving “employee engagement in a hybrid world of work and purchasing, rationalizing or divesting assets to improve their environmental footprint. Themes such as decarbonization will drive deals, with additional opportunities for new ventures stemming from climate risk mitigation innovation.”

Nonetheless, Willis Towers Watson advisers predict that snags with ESG issues “could have a negative impact on deal performance.”

Similarly, law firm Cleary Gottlieb emphasizes that “use of ESG buzzwords won’t be enough to convince investors and other stakeholders that the purported ESG merits of a transaction are more than just window-dressing. Acquirers will need to incorporate more robust ESG due diligence into their transaction planning as they confirm the investment thesis and implications for existing ESG commitments.”

Therefore, look for 2022 M&A that materializes around ESG to contain weight and heft.