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ESG in Deals

How ESG can add value to M&A

Shareholders. Employees. Customers. The general public. They’re all looking more closely at what companies stand for—their purpose and how they fulfill it. That includes environmental, social and governance (ESG) investments, and scrutiny is even more intense during a deal.

So how do you help your various stakeholders understand what you’re doing with ESG and make sure your commitment to it is clear to all parties in a transaction? Gains have been made in recent years in some areas, such as diversity and inclusion metrics, but in other cases, data can be elusive, making informed decisions harder. Even with information gaps, leaders can and should tell a clear story about their organization’s purpose—indicating priorities, demonstrating investments, acknowledging gaps and highlighting progress. This is an opportunity to show how your ESG initiatives benefit broader society and help grow business. That, in turn, demonstrates your company’s value to other companies and can be a critical factor in a potential deal.

To improve your company’s position in a deal, explain your purpose to stakeholders

Customers

Whether it’s advertising, social media or other brand activity, many avenues exist for making your purpose public and connecting with customers who are increasingly focused on ESG. Customer acceptance and admiration of a company’s ESG approach is an opportunity to elevate value in a deal. Consider our June 2021 Global Consumer Insights Survey, in which 50% of consumers said that they were now more eco-friendly than they’d been in March. And customers aren’t always individual consumers. If you do any B2B business, bear in mind that other companies may face the same pressure to have a positive ESG record, which could influence decisions on whom they do business with. It’s also not just about avoiding risk.

Shareholders

Successful, admired companies are a shareholder’s dream, and loss of value as a result of high-profile missteps is a nightmare. Failing to convince shareholders that you’re committed to ESG can cause them to question the company and push for major change, which could bring further disruption that impedes growth. A deal done under pressure is less likely to succeed. Be clear about how workplace and leadership diversity, economic inequality, climate change and other issues are key business concerns. Addressed honestly and deliberately, these factors can be opportunities to increase shareholder value and elevate your company’s position as a buyer, seller or both.

Employees

They may be part of the company and have more inside information than shareholders, customers and deal partners, but employees can be a tough audience. They see firsthand when and where words represent true action, and they can be skeptical. With so many digital venues for candid comments, buyers and sellers today have a better view into how a company’s employees perceive its ESG efforts. Don’t run the risk of having conflicting information and opinions during a transaction, especially when there already may be uncertainty among employees. Embrace transparency and foster honest dialogue about the elements of ESG that matter to them the most — and then prove you’re listening through real investment. Building that trust results in a stronger company and a more appealing deal partner.

How PwC helps navigate ESG considerations in M&A

ESG needs to be integrated into your overall investment framework so you’re ready to consider it across a full deal lifecycle, whether you’re a corporate or private acquirer.

Our team is comprised of subject matter specialists with deep M&A strategy, engineering, accounting and sustainability backgrounds to help provide you with a differentiated point of view, and we can work seamlessly with your cross-functional teams (business development, investor relations, legal, sustainability and finance staff).

PwC can help you:

  • Integrate ESG into your strategies and identify opportunities for growth, enhance reputation, ease access to finance and be competitive in talent acquisition. 

  • Address the growing need of providing high quality ESG data and disclosures to investors and stakeholders and assess ESG risks and value creation opportunities in deals (acquisitions and divestitures).

  • Develop ESG strategies to maximize access to investor capital during capital raising activities (IPOs, SPACs, Green/Social Bonds). 

  • Create lasting value through ESG initiatives in deals and beyond.

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Aaron Gilcreast

Aaron Gilcreast

ESG Deals Leader and Global Valuation Leader, PwC US

Colin Wittmer

Colin Wittmer

Deals Leader, PwC US

Casey Herman

Casey Herman

US ESG Leader, PwC US

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