PROFIT | M & A STRATEGY
“ APAC differs from the EU and US in that ESG has not been driven by extensive country regulation . Instead , there is a growing appreciation across APAC that ESG risk can materially impact business value , serve as a source of value creation , and provide access to international markets and competitive green capital within and outside APAC ”
Will Symons Climate & Sustainability Leader APAC , Deloitte Lalli says despite recent negative economic news , the equity and debt markets remain supportive and there is plenty of capital to support M & A strategies that deliver on the strategic imperative to achieve net zero , accelerate growth , or provide access to new technology , supply chains and geographies .
“ Change is being driven from all sides ,” says Lalli . “ In the financial markets , lenders and shareholders are actively seeking ESG opportunities , and crucially , presenting companies with the opportunity to reduce their cost of capital .
“ Within organisations , corporate values and purpose are also driving change . We ’ re seeing that as a key battleground in the recruitment and retention of staff .”
M & A can be an accelerator for improving a company ’ s ESG profile and taking advantage of the current ESG tailwinds , according to Hoffman .
“ This can be the case when M & A activity positions the company with access to new capabilities and assets to grow products / services in markets that are positioned to thrive in a low carbon , sustainable economy ,” she says .
“ Mergers also have the potential to result in opportunities to deliver on operational and financial synergies , which can also lead to carbon footprint ( amongst other ESG ) synergies for the MergeCo . M & A activity is also increasingly serving as the impetus for the new combined entity or separated entities to redefine ( and increase ) the level of ambition of their ESG commitments .”
Understanding what ESG means is crucial to success One of the issues with ESG is a clear understanding of what ESG actually means – and this varies depending on the business . “ ESG is a very broad term and how it applies to businesses will depend on the sector they operate in ,” adds Lalli . “ For example , energy and resource efficiency are likely to be high priorities for manufacturers , but for knowledge-based employers , skills development , diversity and shared prosperity are likely to deliver sustainable benefits .
“ Once the ESG priorities are understood , the next stage is to start measuring current performance and identify gaps where M & A can accelerate change . We ’ re starting to see listed companies lead in this area , and ESG due-diligence is now becoming a routine part of assessing potential acquisition targets .”
36 November 2022