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MENA FN

The Importance of ESG In M&A In The Middle East

The Importance of ESG In M&A In The Middle East

  • 20.05.2022
  • min read

MENA FN

The Importance of ESG In M&A In The Middle East

Environmental, social, and corporate governance (ESG) is rapidly becoming front of mind for regulators, investors, customers, and employees—and it is rising to the top of corporate agendas as well. Many now view a well-devised corporate ESG strategy as a positive indicator for long-term revenue growth.

In our recent global survey of 281 M&A executives, 65% expect their own company's focus on ESG to increase over the next three years. This view extends to M&A. More than half of surveyed respondents either see ESG leadership as justifying higher deal valuations or expect this to be the case in the future, indicating a need for buyers to appropriately assess and value their targets' ESG performance.

But are corporate buyers accounting for ESG in their M&A process today?

Not yet, according to our survey. Only 11% of respondents say they extensively assess ESG during the deal-making process on a regular basis. In fact, out of 10 elements of the corporate M&A process, ESG was the least-emphasized dimension. Many are struggling to determine how to embed the process of assessing the ESG implications of an acquisition into their M&A strategy.

Some companies are ahead on this curve. By incorporating ESG into their M&A process, they have set themselves up with an advantage in pursuing value creation opportunities and a head start in meeting their ESG imperatives.

By beginning to unlock ESG as an M&A priority and a factor in delivering deal value, these companies move ahead of the majority of companies that have yet to evolve their M&A models to account for the growing sophistication of ESG. They've discovered that the traditional check-the-box approach to sustainability issues falls short. When assessing targets, they dig deeper on issues ranging from greenhouse gas emissions to DEI, and from business ethics to supply chains.

 

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