Climate Change Transforming How Dealmakers Evaluate and Execute M&A
LONDON OCTOBER: UK dealmakers are equally convinced that the biggest threats to completing deals in the next 12 months will be issues stemming from the pandemic and climate change. This is according to a survey of 400 UK and US-based dealmakers by Datasite, a leading SaaS technology provider for mergers and acquisitions (M&A) professionals.
The research shows that 41% of UK dealmakers expect the biggest M&A dealbreaker in the next 12 months to be COVID-19, just ahead of climate change at 40%. By contrast, 48% of US dealmakers expect climate change to be the biggest dealbreaker in the next 12 months, followed by COVID-19 at 32%.
“Britain’s economy has certainly come a long way following the darkest days of the pandemic, but we still have some labour and supply chain issues to resolve,” said Merlin Piscitelli, Chief Revenue Officer for Datasite in Europe, the Middle East and Africa. “UK Dealmakers see this. At the same time, they also see that extreme weather and circumstances brought on by climate change are causing havoc for companies, from operational disruptions to infrastructure issues, and with the UN Climate Change Conference (COP26) coming up in November, they are focused on what new policies and proposals are ahead.”
In fact, with the uncertainty of the external environment, including continuous Brexit challenges and the recovery from COVID-19, nearly 70% of UK dealmakers said climate change is high or very high on their company’s agenda. Additionally, with corporates and financial institutions facing rising regulatory and commercial pressure to protect themselves from the impact of climate change and align with the global sustainability agenda, UK dealmakers are reshaping processes and building new capabilities. As a result, over half (55%) said their companies have explored a new M&A strategy, while 27% have said their businesses have implemented a new strategy.
“These findings reveal the direct impact climate change is having on the financial markets,” said Datasite’s Piscitelli. “The data also comes at a time when the volume of M&A deals has reached record levels in the UK, suggesting momentum could shift if climate-change issues are not addressed.”
Other key UK findings from the research include:
- 42% of UK dealmakers want to see unified commitment from COP26, while 40% want to see leadership from government when it comes to climate change
- 76% of UK dealmakers believe the UK and FCA need to be more ambitious when integrating ESG factors into the financial markets
Globally, 64% of all UK and US dealmakers expect more deals to fall apart because of climate-change related due diligence over the next two years. Other key global findings include:
- Regulation related (26%) and risk to physical assets (23%) were the biggest climate-change related issues expected to break the most deals
- 65% of dealmakers say they often see deals fall apart because of future ESG-related risks
Piscitelli added, “Given all of this, both buyers and sellers need to understand the impact of climate change on M&A activity, including negotiations, speed, volume and the value of transactions, and successfully anticipate developments to combat possible risks and reap potential rewards.”