What role have environmental, social, and corporate governance ("ESG") considerations been playing in M&A negotiations and director decision-making?
Recent years have seen much debate regarding the interaction of ESG and directors' fiduciary duties generally.
Also well-explored are such ESG issues in M&A as ESG due diligence, ESG in target valuation, and post-closing ESG integration.
Comparatively less analysis has occurred regarding the more specific question of the interaction of ESG-considerations and directors' fiduciary duties in the M&A context.
This being the case, we took a deeper dive into this issue in a recent edition of The M&A Lawyer (PDF, 188 KB), including by revisiting two large Canada/U.S. cross-border M&A deals from recent years. Our findings include that:
- The rise to prominence of ESG flags a potentially complex issue for corporate fiduciaries going forward: whether, and to what extent, ESG issues should be taken into account in deciding what constitutes a "superior proposal" for the purpose of a target's "fiduciary out."
- The foregoing "fiduciary out" and "superior proposal" analysis might vary depending on the particular law governing the transaction (i.e., Delaware or Canadian law).
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