In case you haven't noticed, there has been a spate of consolidation activity as businesses rethink their post-recession growth strategies. Some recent numbers I dug up point to an increase of almost 25 percent in deal activity through this year, compared with this time in 2009. But as these mergers take place, will they set back the corporate sustainability programs of either the acquirer or the company being acquired?
That's the question explored in an intriguing new article by Deloitte about the potential impact of the sustainability mindset on corporate mergers and acquisitions. Here are some of the overriding conclusions and questions that I drew from the essay (in no particular order):
- Do both companies even HAVE sustainability programs? If so, how integral are they to day-to-day business operations? If both don't have a plan, will the value of the company being acquired be decreased if sustainability is abandoned after the merger? If sustainability is at the heart of the proposed union, does it increase the value of the deal?
- What sustainability risks are associated with each company's supply chain? Can sustainability programs be accelerated through the acquisition or will there be a set back?
- How healthy are both companies' facilities? Will it cost an inordinate amount of money to bring one of the companies' buildings up to the green credos of the other?
- Since sustainability regulations tend to be regional or imposed at a statewide level, if an acquisition will take your company into new geographic turf, tread carefully.
- Remember that the Securities and Exchange Commission in the United States now considers certain environmental exposures and climate-related disclosures to be relevant information that companies should disclose in their reporting activity.
- There are certain sectors where sustainability concerns will matter more than others. Consumer products companies, especially those with extensive supply chains, have an extremely visible profile when it comes to green and environmental matters. LIkewise, for technology companies and for energy and utility businesses. If yours is a traditional oil or gas company, as an example, it might be in your interest to invest in a company developing alternative energy sources.
- The integration team must have sustainability as a core goal in order to protect these interests.
I wondered about some of these issues in the context of a recent technology mega-merger: That of Hewlett-Packard and 3Par. This is important because HP has set out to establish itself as one of the greenest technology companies on the planet -- if not the greenest -- through both energy innovations that have decreased the amount of electricity that its products uses and by materials choices that make its products less toxic. Its efforts recently earned it a public kudos in the latest Greenpeace Greener Electronics Guide. While 3Par has been less active (heck its not as consumer-facing, so why not?), the company HAS for a long time put a big push behind the notion that its storage is carbon-neutral. It has been doing this through both technology innovation and with a strategy that funds the purchase of carbon offsets every time someone buys 3Par storage. It should be interesting to see if that program perpetuates post-merger.
Just as any company would explore the legal and financial ramifications of a merger in a due diligence phase, so must sustainability be on the table in order for very real progress to be protected. As M&A activity increases, this will definitely be a trend to watch.
This post was originally published on Smartplanet.com