ESG in the M&A narrative: Part 1

ESG in the M&A narrative: Part 1

ESG in the M&A narrative: Part 1 768 512 Tamela

In recent years, ESG factors have become somewhat of a buzzword in the finance world. During this time, the demand for ESG-focused…

In recent years, ESG factors have become somewhat of a buzzword in the finance world. During this time, the demand for ESG-focused investments and funds has been on the rise, with investment firms and companies reshaping their strategies to align with ESG standards. But how does ESG fit into the M&A narrative?

ESG is increasingly becoming an important factor in the M&A space as it offers acquirers the opportunity to improve their ESG credentials by absorbing targets who have better ESG credentials. Blackstone Inc. acquired Sphera Solutions Inc. in July 2021 in a deal valued at $1.4 billion. This deal has been seen as an example of ESG focused target identification since Sphera is a leading provider of ESG software, data, and consulting services. Blackstone’s CEO stated that leveraging Sphera’s ESG capabilities was part of their vision going into this acquisition.

Locally, Seriti Resources’ acquisition of a controlling stake in Windlab Africa has been viewed as an ESG-driven transaction with an emphasis on “E”. Seriti is a major coal supplier to Eskom and this R892 million deal will allow them to move into the renewable energy space. Seriti’s CEO, Mike Teke, emphasised that the transaction was part of their ESG objectives. Other local mining companies have also been investing in renewable energy projects and we may see more M&A transactions with a focus on the “E” in the future.

Aside from the strategic upsides of acquiring an ESG-focused target, ESG ratings can also offer acquirors more comfort about the target’s corporate values and reputational risks. For deal advisors, the increasing focus on ESG factors has meant that various steps in the typical deal life cycle have to be enhanced to incorporate ESG. Part II of this paper will explore this in more detail.

How can we help?

Tamela Holdings is a Corporate Advisor and Sponsor business with extensive market experience. Tamela has the expertise to assist you in navigating merger and acquisition transactions from cradle to grave. To the extent that you may be interested in exploring your strategic rationale for an M&A deal and require guidance on the process and considerations, Tamela will be at your service.

For more information, please contact Tshepo Radebe, 011 783 4907 /

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