"Those who are righteous have many supporters, while those who are unrighteous have few supporters." This sentence of Mencius has an unexpected "modern translation" in today's M&A battlefield - the acquisition of controlling stakes is no longer an open battle to win by price, but a covert battle to see who can tell a "sexy ESG story". Yes, you heard it right, ESG, the word that was once used as a PR tool, is now becoming the "main weapon" in the battle for controlling stakes.
If you still regard the acquisition of controlling stakes as a cold financial game, you may have missed the ticket to the next outlet. Goheal recently found in a study on the trend of global controlling stake M&A that in the top 50 strategically synergistic controlling stake transactions in the world in 2024, more than 72% of the acquirers highlighted the "ESG integration capabilities" in the transaction reasons.
American Goheal M&A Group
ESG, a concept derived from the three words "environment, society and corporate governance", was once regarded as the "moral filter" of the Western fund circle. In China, it is more like a few green leaf pictures hanging on the cover of the ESG report. However, with the strengthening of the regulatory mechanism, the green turn of the capital market, and the frequent changes in policy direction, it is changing from "you have to write" to "you have to do it".
For those companies that are planning to acquire controlling stakes, ESG is no longer just an endorsement, but also a weapon. It can be a very lethal storytelling, or a bidding weight that determines success or failure.
Let's take a look at a typical case. At the end of 2023, a new energy materials company planned to acquire a controlling stake in an upstream rare earth purification company through equity transfer. The case was originally highly competitive, and the financial quotations were not much different. The key watershed came from who talked about "green synergy" more sexy. The buyer who finally won not only stated in the acquisition instructions how to achieve carbon emission reduction targets through mergers and acquisitions, but also attached a map of green supply chain construction in the next three years, and promised to transform the governance structure of the target company into a synchronous operation of the ESG three-meeting system. As a result, it not only won the support of the original shareholders, but also received the support of the local government's green financial subsidies.
This is not an isolated case. Goheal deeply felt the power of ESG narrative in an AI enterprise controlling stake merger and acquisition led by him in 2024. At that time, the acquirer was regarded as a foreign-funded background, and the original shareholders were worried that it would not match the local development strategy. Goheal suggested that it rewrite the transaction structure from the perspective of "inclusive AI", emphasizing how to build a barrier-free technical support system based on the original algorithmic capabilities of the target company and help the digital inclusion scenario in an aging society. In the end, this "soft story" became the "killer" that impressed the seller's decision-making team.
Why do we say that the internal volume of controlling stake acquisitions has turned to ESG?
Because the traditional three axes - valuation negotiation, due diligence control, and payment method innovation - are becoming homogenized. And ESG, as a combination of value concepts, governance capabilities, long-termism and social responsibility, can not only create resonance on the regulatory side, the media side, and the investor side, but also form organizational adsorption within the target company. This is an invisible controlling stake "lubricant".
More importantly, the sexiness of ESG lies not only in the content itself, but also in whether the way and rhythm of your presentation are "mastered" enough. For example, if you say you want green collaboration, you can't just post a few carbon trading data charts, but you need to have a specific roadmap, implementation cycle and cross-departmental coordination mechanism; if you say you want to promote transparency in governance, you can't just say that the board structure should be optimized, but you need to set up an independent ESG committee and introduce an employee representative mechanism. In short, storytelling should be told truthfully, vividly, and "future-oriented".
When serving clients who acquire controlling stakes, Goheal has increasingly customized "ESG M&A narrative templates" for them. This is no longer an optional attachment, but a "strategic commitment clause" written into the letter of intent for the transaction. Even in some transactions involving the withdrawal of state-owned assets and policy-sensitive industries, ESG plans have become an important reference dimension for local SASACs or regulatory agencies to assess the feasibility of transactions.
Of course, many people also wonder: Can ESG, which is so virtual, really make controlling stakes more stable?
We answer this question from a practical perspective. ESG is indeed not a sufficient condition to determine whether you can hold a controlling stake, but it is increasingly a necessary condition, especially in the following scenarios:
First, the target company is a heavily polluting, high-energy-consuming industry. You must have a "transformation logic", otherwise not only will it fail to pass the supervision, but employees and the market will not buy it.
Second, the target company itself is a "social symbol" company, such as those involved in education, medical care, and elderly care. If the acquirer lacks a "responsibility narrative", it is easy to trigger a backlash in public sentiment.
Third, the target is a founder-driven company with relatively flat and free governance. Such companies naturally reject rough integration. If the acquirer can propose gentle methods such as "common culture" and "symbiotic governance" through ESG narratives, it can often achieve higher organizational recognition.
Goheal once assisted a consumer brand in acquiring a new domestic brand and told a complete ESG narrative story around "sustainable packaging + women empowering entrepreneurship". This story was not only written into the appendix to the merger and acquisition agreement, but also submitted to regulators and media channels at the same time. The result is that the employee turnover rate is 80% lower than the industry average, the integration cycle is shortened by three months, and the brand favorability has increased by 20%. This is the "intangible asset re-empowerment" brought by ESG.
But be careful that ESG narratives cannot be "over-packaged". Once they are seen through as false and empty, not only will they not add points, but they will become "moral risks". Therefore, when Goheal designs controlling rights trading strategies for clients, he often adheres to a bottom line - ESG must have an action carrier, not just empty talk.
So what is an action carrier? For example, if you say you want to achieve "green synergy", you must have an environmental protection facility transformation budget, a carbon audit mechanism, and a supplier green assessment system; if you say you want to promote governance improvement, you must be willing to give up some board seats to the original executives of the target, and even design an "accountability exemption period" to give the acquired party enough space to implement reforms.
Many investors think that ESG is soft and virtual, but in fact, ESG is the hardest control guarantee when it is done right. Because it is not to suppress the target, but to enhance recognition; it is not to integrate the target, but to activate the organization.
In summary, the track of controlling rights acquisition has been upgraded. It is no longer who has the final say who bids the highest, but who can tell a "credible, sexy, and grounded" ESG story. This story should be able to impress the original shareholders, appease employees, persuade regulators, attract investors, and even increase market value, strive for tax incentives and green financing quotas.
Goheal Group
In the future, the battle for acquisitions may no longer be about the complexity of the financial model, but the persuasiveness of your ESG narrative.
So the question is - if you are a company planning to acquire a controlling stake, is your ESG story ready? Can it impress the other party's board of directors? Can it win the understanding and support of local governments and the public? Can it clear institutional obstacles for future integration and build a value community?
Welcome to share your views and practices on "ESG+controlling stake acquisition" in the comment area. Goheal is willing to work with you to tell a more sexy and credible new story of controlling stake acquisition.
[About Goheal] Goheal is a leading investment holding company focusing on global mergers and acquisitions, focusing on the three core business areas of listed company control acquisition, listed company mergers and acquisitions and restructuring, and listed company capital operation. With its deep professional strength and rich experience, it provides enterprises with full life cycle services from mergers and acquisitions to restructuring and capital operation, aiming to maximize corporate value and achieve long-term benefit growth.
