Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner.

Investment in ESG tech is on the rise

M&A in ESG Technology.

M&A is on the increase in the ESG technology sector, as regulators and investors demand more robust and transparent reporting.

M&A in the ESG technology and services sector is accelerating.

Continuing pressure from regulators and investors is driving focus on how to meet the complex requirements of ESG measurement and reporting.

As pressure continues to accelerate globally, expect the investment trend to continue.

According to the ESG M&A Report 2H2022 from Hampleton Partners, the first half of 2022 saw 93 deals around the world targeting an ESG firm, a 173% increase on 1H2019 numbers. The report explores some of the transactions in ESG tech over the last five years, with a focus on software and outsourced services, as well as technology solutions more broadly.

This increase in deal making can be seen as a result of the impact of the European Green Deal, the SEC’s proposal for a new climate disclosure rule and creation of the International Sustainability Standards Board (ISSB) at the international climate conference in 2021, COP26. These all provide increasing pressure on companies to provide an accounting of the environmental risks they face, and the measures they’re taking in response.

Beyond safeguarding against legal missteps, ESG reporting also sets the tone for investing

ESG is now linked to longer-term performance, and can provide opportunities for cost savings, revenue generation and risk mitigation. Stock exchanges, financial regulators, lenders and asset managers are making it part of how they invest but, according to a survey from PwC,  only one third of investors on average think the quality of the reporting they’re seeing is good enough.

Lolita White, senior analyst, Hampleton Partners, said: “While everything seems to point to the advent of a new age of regulatory scrutiny and corporate responsibility in the race to net zero and other goals, businesses’ ESG reporting is not yet up to scratch.”

There is an urgent need for companies to improve their use of ESG tech to support the real-time recording, analysis, reporting and visibility of their ESG data. They need to ensure their decisions about why, where and how to manage ESG risks, which can have a material effect on business and share-price performance, are robust.

That itself is driving increasing numbers of software and services firms launching services in this area. It’s also driving interest in such companies as M&A targets. For example, Hampleton’s research logged 52 deals in the Enterprise Software and software as a service (SaaS) segment in the first half of 2022, more than doubling the number of deals closed in the same period in 2019.

ESG deal valuations and multiples

Looking at valuations across all ESG M&A targeting software, services or technology solutions, the trailing five year median revenue has stood at 2.7x, with 50% of all deals announced being in the 0.8x to 6.7x range. The lowest was 0.1x, while the highest was 29.0x.

The trailing five year median EBITDA multiple was 13.6x, with 50% of all deals announced in the 9.5x to 19.4x range. The lowest was 2.1x, while the highest was 74.5x.

Largest ESG deals 2022

Blackbaud Inc. bought EVERFI Inc for $754m – social impact e-learning SaaS

Apax Partners LLP bought Alcumus Group Ltd for $813m – risk and compliance management SaaS

Top acquirers of ESG companies since 2019

The four top acquirers of ESG companies over the past 30 months and their three most recent acquisitions are:

Diligent – Insignia, Accuvio, Steele

accenture – Akzente, Greenfish, Avieco

EcoOnline – StaySafe, Biome Environmental, Nordic Port

Ideagen – CompliSpace, Ai XPRT, Qualtrax

The future of ESG technology M&A

Lolita White continued:Beyond M&A, there is increasing conversation around the use and usefulness of ESG reporting. Some criticise ESG as a public relations move, or even a means to cash in on the higher motives of customers, investors, or employees.

“Far from negating the case for rigorous reporting, we believe that these debates will amplify the need for accurate and robust disclosure, thus spurring more active regulation with increasingly granular requirements. In turn, this will open many doors for ESG software and services providers helping customers navigate the ever changing ESG landscape.”

More from SG Voice

Latest Posts