New Report from Vinson & Elkins Outlines the Evolving Role of Environmental, Social, and Governance Factors in Mergers and Acquisitions

The report analyzes five areas where ESG issues can impact M&A deals, from the initial stages of identifying targets, conducting due diligence and valuation to the latter stages of financing the deal, obtaining representation and warranty insurance, closing the deal, and integrating the acquisition and conducting any necessary remediation steps post-closing.

The report highlights key trends and considerations for companies to better understand the opportunities and risks in an ever-changing dealmaking landscape, including:

• ESG factors are playing an increasingly vital role in M&A transactions, impacting deal evaluations, risk mitigation, and value creation, according to third-party data cited in the report
• Companies engaging in M&A must strategically incorporate ESG considerations throughout the entire deal process, as neglecting to do so can have substantial financial and reputational consequences

“In the world of dealmaking, ESG isn’t just an acronym; it’s a fundamental valuation consideration that arises time and again.  It is imperative for companies to incorporate ESG factors into their due diligence and decision-making process,” said Lande Spottswood, Mergers and Acquisitions partner, Vinson & Elkins. “Whether seeking to enhance their own profile, gain access to sustainable assets, or avoid risks, companies are navigating numerous complexities of ESG throughout the M&A journey.”

“Acquiring companies with strong ESG profiles can strengthen acquirers by accelerating innovation, expanding into new markets, or diversifying business lines,” said Jon Solorzano, Environmental, Social & Governance counsel, Vinson & Elkins. “But failing to properly assess ESG risks can also lead to significant value erosion. Helping companies to develop processes for understanding how ESG issues impact M&A deals will guide companies towards more informed and strategically aligned decision-making.”

For more insights and to read the full report go to The Evolving Role of ESG in M&A: Balancing Risks and Opportunities.