10 - ESG and Board-Shareholder Engagement in M&A

Summary

Corporate governance debates have undergone a fundamental shift, with environmental,social and governance (“ESG”) issues coming to the forefront of decision-making by boards, executives and shareholders. Across a spectrum ofstakeholders, companies and their boards face pressure to incorporate ESG considerations into their business strategies, including strategies around merger and acquisition (“M&A”) transactions. This chapter addresses how the growth of ESG is poised to affect board and shareholder engagement in M&A. For boards evaluating M&A deals, ESG factors are emerging as critical to all aspects of dealmaking, including selection of targets and buyers, due diligence, governance and integration, and financing. The ESG pressures on M&A deals also influence corporate governance in M&A – implicating board strategy and oversight in M&A, as well as shareholder engagement in M&A. In an ideal world, ESG information can help enhance board and shareholder decision-making around M&A. Yet, whether ESG considerations are likely to do so remains uncertain.