A company’s environmental, social and governance (ESG) agenda is likely to feature more in mergers and acquisitions (M&A), as corporate acquirors place greater importance on ESG due diligence and almost all institutional investors consider ESG factors before deciding whether to support a deal, new research by Numis has revealed.
Our survey reveals a tiny fraction – less than 1% – of the 200 institutional investors we surveyed say they do not consider ESG at all when considering supporting an M&A deal.
Most of our respondents have strong feelings about ESG and the role it plays in deals. Fewer than one in five institutional investors (19%) say they only consider it ‘somewhat’, while the remaining 81% say they consider ESG factors ‘strongly’ or ‘very strongly’ when thinking about whether to support an M&A deal.
ESG has risen up the agenda in recent years, with companies taking more time to consider the carbon footprint and ESG aspects of the assets and businesses they are acquiring. In addition, institutional investors must now be much more aware of ESG and assess the ESG characteristics of their corporate and private equity portfolios.
Our findings come at a time of growing confidence in pursuit of M&A in UK boardrooms – 86% of FTSE 250 company directors surveyed said they expected to pursue M&A in some form in 2022.