The industry of natural resources is receiving a lot of attention these days not just in this country, but beyond the borders as well. The sector is being focused on by many buyers and sellers, since there are fewer risks involved and business is quite predictable. According to a recent merger and acquisition report, the natural resources market has not been fully exploited yet. There are so many state owned companies that actually want more investments and interest from the private sector.
So, while evaluating the deals in the natural resources market, what factors are being considered more important? According to a poll in which more than 300 professionals of the merger and acquisition industry voted, a lot of deal makers are now regarding environmental, social and governance or ESG factors as really important. Never before in the past have issues like rising prices of natural resources, global climatic conditions, and urbanization concerned deal makers. The trends have now changed, and all these things have become fairly significant in the M&A industry.
The poll results state that at least 68% of the respondents who are planning a merger in the upcoming year will consider ESG factors before closing the deal. Similarly, 38% of the investors and 36% of the factors senor management regard ESG factors to be the primary concern. Nearly half of the deal makers set their focus on operational efficiency, revenue enhancement and risk management.
A director of a firm which has recently merged stated that most of the organizations lay their focus on liability assessments and risk management while evaluating the probability of a deal’s success. However those businesses that are more advanced and better informed realize that ESG factors go deeper than just managing risks. All these companies utilize ESG factors to demine the benefits which the merged business can enjoy in terms of finances, reputation and operations.
The poll also asked the respondents to vote for those issues that appeared as the biggest obstacles in considering ESG and evaluating deals. The results suggested reduced support from senior level management, inefficiency or absence of methodologies and lack of expertise to be the primary reasons that led to inaccurate or imprecise analysis of a deal, and eventually cause it to fail.
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