ESG: Creating Value And Mitigating Risk In Mergers & Acquisitions

Companies must consider environmental, social and governance ("ESG") factors in their mergers and acquisitions ("M&A") transactions to achieve maximum value and monitor risks. ESG matters are becoming increasingly significant in M&A transactions as businesses are facing mounting scrutiny and pressure for transparency on climate risk, social justice, sustainability, and corporate governance. To address ESG considerations in the context of an M&A transaction, buyers, including private equity funds and strategic acquirers, should conduct ESG-focused due diligence, allocate ESG risk in the transaction agreement, and perform post-close ESG integration. This article addresses factors contributing to the increased focus on ESG along with commentary on how purchasers can integrate ESG factors in their next M&A deal.