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More than half of CEOs target mergers in 2022 with a focus on ESG

3 minute read

A majority of businesses are expected to pursue mergers and acquisitions this year.

After a record year for mergers and acquisitions, global CEOs have flagged high levels of activity again in 2022 in a new survey from EY.

Of the over 2,000 CEOs surveyed worldwide, 59 per cent expected that their company will pursue acquisitions in the next 12 months, rising from 48 per cent a year ago.

“Deals will remain a key lever in CEOs’ investment toolkit,” said EY global vice-chair of strategy and transactions Andrea Guerzoni.

“Coming off a record-breaking run for M&A, many CEOs will be focusing on integrating assets acquired over the past 12 months, but CEO acquisitive intentions should ensure continued deal activity at high levels in 2022.”

The two biggest priorities for M&A activity were improving operational capabilities (26 per cent) and strengthening ESG positioning and sustainability footprint (20 per cent).

Ninety-nine per cent of CEOs factored ESG and sustainability into their buying strategies and 6 per cent had walked away from a deal during the past year due to ESG-related concerns.

“CEOs see M&A as a critical accelerant for long-term growth strategies,” said Mr Guerzoni.

“As ESG and sustainability concerns are becoming critically important, the market in 2022 is also expected to be fueled by M&A aimed at helping CEOs realise their sustainability strategy goals faster.” 

ESG factors were considered important in strategic decision-making for 82 per cent of CEOs and 21 per cent recognised the competitive advantage of being a sustainability leader.

However, nearly two-thirds had encountered resistance to their sustainability transition strategy from investors and shareholders and 21 per cent said that investors were not showing support for long-term investment plans or remained fixated on quarterly earnings.

“CEOs are ready to set their organisations on a course that should deliver sustained benefits for shareholders and society. What stands out is the need for alignment between CEO thinking and that of investors, when it comes to prioritising sustainability,” noted Mr Guerzoni.

“Resistance from investors and shareholders because of high costs and doubts over long-term returns can derail CEO plans and land their organisations on the wrong side of history.”

Additionally, EY revealed that 54 per cent of CEOs plan to prioritise investment in existing businesses, digital transformation and sustainability in the year ahead.

Eighty-seven per cent of CEOs raised concerns about rising input prices and trade tensions, climate change and increasing competition were identified as the most critical risks to growth.

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