Looking behind the curtain : Exploring the role and content of ESG in M&A Due Diligence

University essay from Uppsala universitet/Företagsekonomiska institutionen; Uppsala universitet/Företagsekonomiska institutionen

Abstract: Issues surrounding the climate crisis are becoming more visible in society, and as a result, topics concerning sustainability and social responsibility increase in importance. At the same time, global Merger and Acquisition (M&A) activity is increasing. Hence, since the opportunities to include sustainability and social responsibility are a part of the world today, they are a part of M&A. Therefore, these aspects need to be considered, and investors are doing so by measuring them with the concept of ESG (Environmental Social Governance). Therefore, ESG criteria are investigated during the Due Diligence process in an M&A. The scientific research within this area is limited. This indicative study was conducted to explore the content and role of ESG in a Due Diligence process in an M&A. The empirical data was collected through a qualitative, multiple-case study investigating Due Diligence cases. Nine semi-structured interviews with investment professionals who participated in 21 Due Diligence cease were carried out and analyzed in three aggregated dimensions of ESG: Environmental, Social and Governance. This study uncovered twelve themes that created a greater understanding of the content of ESG. Investigating ESG in Due Diligence can help to assess risk, identify sources of value, productive capabilities, and support the achievement of long-term objectives. Furthermore, ESG in Due Diligence plays a major role on different levels. Besides enhancing the informative value, ESG adds complexity and cost to the Due Diligence process.

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