ESG has with no doubt become top of the agenda - regulators, consumers, investors and employees place an increasing focus on ESG, affecting businesses worldwide. Correspondingly, ESG is becoming a critical aspect in M&A processes across sectors, and M&A deals are to an increasing extend influenced by ESG criteria.
Companies with strong ESG profiles and high maturity can expect price premiums. A recent study by KPMG found that more than two thirds of respondents would be willing to pay a premium for a Target that demonstrate a high level of ESG maturity in areas that align to their ESG priorities.
On the contrary, companies with high exposure to ESG risks across the value chain or a low ESG maturity (e.g. in relation to ESG reporting and data availability) can expect this to result in direct deal value implications.
Key reasons to include an ESG due diligence in your M&A process:
Assess Target’s alignment with Buyer’s ESG strategy and approach
Identify and assess direct deal value implications (e.g. EV and net debt adjustments) or ESG topics to be addressed in the SPA.
Identify and evaluate sector-or asset-specific ESG opportunities of Target to drive future value creation.
Our ESG services can add value in all stages of the deal cycle
Across all our service offerings, we can cover the full spectrum of environmental, social and governance topics relevant to your transaction by utilising KPMG’s extensive network of subject matter experts and sector teams.
Examples of our services:
Identification of risks and opportunities
- Mitigate ESG risk pre-sales process to reduce bidder risk and improve valuation
- Identify ESG opportunities to be highlighted in sell-side M&A material (IM/MP)
Prepare ESG reporting for a sales process
- Prepare management for the type of ESG data bidders and advisors normally request
- Identify strategic initiatives that can improve ESG KPIs pre due diligence
ESG Due Diligence (Focused or full-scope)
Vendor due diligence:
- Validate the ESG approach
- Highlight ESG value creation opportunities for bidders
- Address bidders concern upfront by proactively identify risks and suggest mitigating actions
- Prepare management for the type of ESG data bidders and advisors normally request
- Input for other sell-side M&A material
Buy-side due diligence:
- Baseline assessment of ESG maturity of the target company
- Assess target compared to bidder’s ESG objectives
- Identify value creation opportunities of target
- Identify risk that should have deal value implications (Net Debt and EBITDA
adjustments)
Integrate ESG into 100-day plans and/or ESG roadmaps
- Develop a structured approach to post deal ESG action
- Reduce risk and ensure full value creation based on ESG DD findings
- Enable ESG to become an integrated part of an overall post-deal plan
Bring ESG reporting up to required standards
- Ensure that ESG reporting complies with the fund’s reporting requirements
- Ensure compliance with upcoming CSRD regulation
Why choose KPMG for your ESG due diligence?
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ESG due diligence competences anchored in our deal advisory team Our ESG due diligence team is an integrated part of our deal advisory team and have long-ranging experience within M&A and thus profound understanding of the deal process and deal implication of ESG risk and opportunities. |
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Wide experience with ESG due diligence for both Corporates and PE We have conducted ESG due diligence for both Corporates and Private Equity Funds and understand what different types of Bidders are expected to request in relation to ESG during a deal process. |
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A multidisciplinary ESG team We combine our extensive M&A/due diligence experience with our strong ESG strategy and reporting competences and have access to the ESG specialists and experts within the international KPMG network, who we bring into play whenever needed. |
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Leveraging knowledge from the Financial Due Diligence When combining our ESG due diligence services with our Financial Due Diligence services, we leverage knowledge across workstreams to ensure an effective process. |
Contact us and read more insights here
Niclas Buch Mahler
Associate Director, Deal Advisory
KPMG in Denmark
