Environmental, Social, and Governance (ESG) factors have become essential considerations in the world of mergers and acquisitions (M&A). While once viewed as peripheral concerns, today, ESG issues are central to how investors, regulators, and stakeholders assess the value and viability of M&A transactions. For UK and EU companies looking to acquire or sell in the U.S., ESG compliance and alignment can make—or break—a deal.
ESG Is No Longer Optional
The shift is real. As of 2024, over 90% of S&P 500 companies publish ESG reports. Stakeholders—including regulators, consumers, employees, and investors—are holding companies to higher standards. ESG due diligence is now a key part of the mergers & acquisitions process, and companies that fail to address these issues risk delays, valuation hits, or even transaction failure.
Regulatory Drivers: U.S. and Beyond
The U.S. Securities and Exchange Commission (SEC) is advancing new rules requiring disclosure of climate-related risks and greenhouse gas emissions. While these rules may still face political challenges, many companies are already adapting to the anticipated standards. Beyond climate disclosures, there is growing pressure for transparency around diversity, workplace safety, and supply chain ethics. Any M&Aadvisor worth their fee will advise clients to assess how ESG performance could impact integration, valuation, or legal risk.
Due Diligence with an ESG Lens
Buyers are increasingly asking:
- What are the target’s ESG risks and liabilities?
- Are there pending environmental or labour disputes?
- Are ESG metrics in place—and verifiable?
ESG red flags can impact pricing and lead to renegotiation. A seller’s failure to disclose or mitigate ESG liabilities could later trigger indemnity claims or reputational fallout.
This is why ESG is now deeply embedded into the mergers and acquisitions due diligence process, not just for public companies, but across the board.
ESG as a Value Driver
While ESG compliance is crucial, top-performing acquirers view it as an opportunity. Companies with strong ESG practices often:
- Attract better talent
- Secure favourable financing terms
- Enjoy better brand loyalty
- Command premium valuations
Firms pursuing m and a transactions are not just avoiding ESG risks—they’re also looking to harness ESG-related upside.
What Sellers Should Do
If you’re considering selling your company, prepare ESG documentation early:
- Audit your ESG policies, supply chain, and metrics
- Address gaps and build a roadmap for improvements
- Present your ESG story in a data-backed, strategic manner
This preparation is not just about ticking boxes. It’s about increasing deal value and reducing execution risk.
Integration Challenges
Post-merger, aligning ESG policies across merged entities can be complex. Governance frameworks, employee practices, and environmental reporting standards may differ widely. Ignoring this during integration can lead to cultural clashes, non-compliance, and operational inefficiencies.
With M&A deals increasingly scrutinised by regulators and stakeholders alike, ESG alignment is now a board-level concern.
Why It Matters Now More Than Ever
As of mid-2025, ESG scrutiny is intensifying. With climate-related litigation on the rise in the U.S. and investor expectations growing, ESG failures can become legal and financial liabilities. For example, BlackRock and other institutional investors have begun demanding enhanced ESG risk reporting in all M&A documentation.
The geopolitical backdrop also plays a role. Cross-border deals face additional complexity due to diverging ESG frameworks between the U.S., UK, and EU. UK companies investing in the U.S. must adapt to both investor expectations and U.S. regulatory norms.
In light of increasing consumer and investor activism, ESG missteps are being amplified in the media, which can tarnish brand reputation and negatively influence stock prices. This puts even greater pressure on acquiring firms to rigorously vet ESG issues and ensure alignment with broader strategic goals.
How Abrams Law Can Help
At Abrams Law, we advise on cross-border m and a involving ESG-sensitive sectors, from tech and manufacturing to financial services and consumer goods. Our transatlantic legal team:
- Conducts ESG risk reviews during due diligence
- Drafts ESG-aligned representations and warranties
- Assists in integrating ESG policies post-deal
Whether you’re buying or selling, we help position your deal to succeed in today’s ESG-focused world.
