October 18, 2023
Capitalizing on ESG-Related Synergies in M&A
In recent years, achieving synergies associated with a target’s ESG strengths to enhance the combined company’s revenues and profitability has become an increasingly important part of many M&A transactions. This Boston Consulting Group memo provides some insights into best practices for achieving ESG-related synergies. This excerpt discusses the need to move quickly to capitalize on synergy opportunities as soon as the deal closes:
After the deal closes, start implementing ESG synergies right away. To obtain comprehensive data about the acquired company, engage in open-book discussions, town hall meetings, or small group sessions. Use this detailed information to validate targets and plans developed in earlier phases, execute risk management and savings initiatives, and, if necessary, reprioritize longer-term opportunities.
The execution phase is also the time to fine-tune the new or renewed ESG priorities and ambitions for the combined entity, as well as to define a roadmap for capturing the value. Finally, create a culture of collaboration among teams from acquirer and acquiree so that they can pursue shared goals aimed at enhancing the combined entity’s ESG performance and unlocking further value.
The memo also discusses the nature of both quantifiable and non-quantifiable ESG-related synergies. It points out that those synergies go beyond risk mitigation and encompass the ways in which an acquirer can generate value for the combined entity by utilizing its own ESG practices and those of the target, as well as by implementing new operating models and generating scale effects.
– John Jenkins