Is M&A starting to be driven by sustainability issues?

Recently I’ve been thinking more and more about sustainable business strategy and in particular, how eventually we’ll see large corporations buy smaller, more efficient and sustainable organizations for not just assets, but more so for their sustainability know-how.  Sustainability has it’s challenges for business leaders.  It tends to be difficult to articulate into hard numbers, which of course is what all of us in business and finance tend to look for.

This week has highlighted a very interesting transaction seeing UPS purchase TNT.  My guess is that TNT was an attractive target partially because it has been was a leader in sustainable business practices.  In 2010, TNT’s then President, Peter Bakker, received the Sustainability Leadership Award and in 2009, Mr. Bakker was also awarded the Clinton Global Citizen Award which recognizes corporate responsibility efforts of leaders.  However, when reading the press, there is absolutely no mention about this element of value within the transaction by either the media or financial analysts.

Should we be surprised if it were driven by sustainability?  I don’t think we should.  Last fall I heard the presentation by a UPS representative speak at the Commit Forum in NYC.  The speaker made it clear that as UPS started to measure and monitor key sustainability performance indicators,  it was recognizing that efficiencies would be a business driver going forward and ultimately, new business opportunities.  At the time, I read between the lines to mean acquisitions.  Therefore, I was not surprised at all to see the transaction come to fruition.  This leads to the question of whether we are seeing other transaction also being driven by the same motivation?

As I try to answer that question, I came across an article written by Kirsty Jenkinson at Ethical Corporation.  Ironically, it appears that there have been other deals being driven by sustainability related themes of resource scarcity.  To name a few that she mentions:

Shale Gas:

  • Chevron purchased Altas Energy
  • Statoil bought Brigham Exploration
  • Total purchased a stake in Chesapeak Energy

Although much controversy revolves around these resources, these acquisitions are still happening because of resource scarcity and energy security issues

Food & Science Industries

Dupont purchased Danisco – a producer of food ingredients, enzymes and bio-based solutions which appears to be driven by the need for sustainable food and fuel.

Ecolab purchsed Nalco – a water treatment and process company which is obviously being driven by water scarcity.

Perhaps overall it’s too early to make the call that sustainability will drive mergers and acquisitions, but from my view I think it certainly can be a major competetive issue.  Now the question remains, will the banking community eventually wake-up to this embedded value in corporations and subsequently desire to value it appropriately.   My guess is yes and this could clearly be our tipping point going forward.

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This entry was posted in Competitiveness, Corporate Responsibility, Social and Governance (ESG), Sustainability, Sustainable Investing. Bookmark the permalink.

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