1. Fragmented Laws

ESG laws and regulations are fragmented, with no centralised framework. This makes tracking relevant requirements and ensuring compliance particularly challenging for companies. Conducting legal due diligence on ESG in M&A transactions which goes beyond obtaining a target company’s’ confirmation on compliance and getting real data may be difficult.

2. Evolving Nature of ESG

ESG laws, regulations and guidelines are constantly evolving, posing challenges to stakeholders in M&A transactions. Managing the complexities and uncertainties of ESG compliance may affect deal timelines, structures and valuations. This is particularly pertinent for M&A transactions where time is of essence.

3. Costs and Expenses

Conducting legal due diligence on ESG compliance in M&A transactions in addition to the customary legal due diligence requires significant time and resources, adding to the cost and time pressure of legal due diligence.

4. Integration Difficulties

Building ESG processes into business operations poses significant challenges for some companies. Incorporating ESG factors into business operations during post-merger integration adds additional challenges, particularly when aligning various stakeholders’ priorities.

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This post first posted on LinkedIn on 12 December 2024.