I’ve noticed an increase in the number of UK manufacturing businesses looking to exit, which are big on ESG principles.
It wasn’t that long ago, when anything Environmental, Social & Governance felt like corporate woo-woo and irrelevant in the SME world.
But for many business owners thinking of exiting their business in the next few years, ESG is becoming much more relevant and a driver of value.
🔵 Environmental Stewardship. Your business can unlock substantial long-term value for its new owners through energy-efficient operations, waste minimisation and sustainable supply chains, yielding major cost savings. Reputation is a valuable asset from a buyer’s perspective, particularly from larger competitors, corporates and funds.
🔵 Social Responsibility. It’s never been more important for buyers to verify you have an inclusive, diverse and healthy culture in the workplace and throughout your supply chain. Having controls in place to ensure that workers are fairly paid and work in safe and healthy conditions give buyers greater confidence and impacts valuation. Ultimately it provides a competitive edge with attracting talent, plus it’s a differentiator in the marketplace. Both are crucial aspects that potential acquirers will evaluate during due diligence.
🔵 Governance. Managing your business practices in a robust and transparent way makes you more credible to buyers. Ethical governance means monitoring and enforcing policies like anti-corruption and whistleblower protection. Weak governance means lower valuations and higher risks for the other side in the transaction.
Yes, the shape and form of your ESG strategy will be specific to your company, but ESG-aware businesses will command a premium when it comes to an exit.