MEDIA RELEASE

Achieving a sustainable future is one of the most significant organisational risks of the 21st century. This creates an opportunity for organisations to ensure that their M&A processes make a material, positive contribution to a sustainable operating model. Failure to adequately assess the impact of sustainability risks can threaten the success of M&A transactions.

Finance and Accountancy Professionals: Navigating the Path to Sustainable Transactions

Accountancy and finance professionals play an essential role in the M&A transaction process. They use their skills to assess complex risks, helping organisations transform their operating models to be more sustainable.

With sustainability-related issues increasingly driving M&A activity, an important joint report Sustainability-related issues and transactional due diligence from the Association of Chartered Certified Accountants (ACCA) and Chartered Accountants Australia and New Zealand (CA ANZ), examines how the interrelationship between M&A and sustainability is crucial for corporates and their stakeholders.

The report sets out three key messages:

• sustainability forms a fundamental part of the strategic intent of M&A transactions and of the valuation of an entity, therefore the related opportunities and risks cannot be ignored;
• sustainability-related risk and opportunities must be considered as part of the due diligence process; and
• finance teams must have an appropriate level of knowledge and expertise to manage the transaction cycle, including the ability to assess and understand sustainability implications.

CFOs must identify sustainability considerations during the investment and divestment cycles. Critical business risks are now arising from sustainability-related issues, and these can pose a threat to the outcome of transactions.

The report examines the sustainability considerations in the due diligence process under strategic, environmental, social economic and governance. Sustainability should be a consideration through each step of the transaction workflow: from strategy and acquisition planning through to due diligence and closing. The report provides tips to help guide CFOs and their finance teams when considering sustainability-related issues in the M&A transaction process.

Expert insights

Clive Webb, Head of Business Management, ACCA, said: ‘It cannot be stated too loudly that in the M&A process there are significant numbers of risks which could derail an organisation's journey towards a sustainable operating model. Failure to adequately assess the impact of those risks, and the opportunities which arise, can create a threat to the success of the M&A transaction. As accountancy and finance professionals we are best placed to lead that assessment.

‘Four main factors determine why sustainability matters in a transaction – financial institutions and investors; supply chains; regulators; and customers; clients and employees. They vary according to location and whether they are sunrise or sunset industries.’

Simon Grant, Group Executive APS and International, CA ANZ said: ‘Accountancy and finance professionals must grow the appropriate skills and knowledge and capitalise upon ‘on-the-job’ learning opportunities. They also need to constantly bear in mind the ethical dimension of any transaction. Ethics must be at the heart of everything that we do.

‘Assessing the impact of sustainability-related risks and opportunities requires a significant familiarity with social, economic and environmental issues. Professional scepticism is also required when considering risks of greenwashing and bluewashing against the potential upside of investment.’

Prof Dr Christopher Kummer, President, Institute of Mergers, Acquisitions and Alliances (IMAA), Austria, said: ‘in the context of evaluating new investments or acquisition opportunities, organisations are now employing ESG criteria to gauge the extent to which the prospective target aligns with their sustainability objectives.’