CSR and Sustainability factors in Mergers and Acquisition

The perception about CSR has always been about spending CSR Budget and is reinforced
by the Government. This belief leads us to the prime challenge of de-valuing Intangibles
and non-financial reportings.
In 2012, at the Strategic Growth Forum organized by E&Y I raised a query Do the companies while mergers and
acquisition consider CSR? The response was zilch and ambiguous. Today, in 2014 post the approval of Companies ACT
2013, I raised the same query and the response is the same. In fact, the answer of the M&A Professional was why is CSR
factor essential while dealing in M&A?
CSR Role The Ignorant WE!
It is flabbergasting to listen such questions from well-known philanthropist, industrialist to M&A Professionals. How devalued are non-financial reporting, and intangible gains even after making maximum contribution towards the growth of
the company.
On further dwelling on the issue I realize that people are less aware about its importance. There is less knowledge about
methodologies such as Social Return on Investment (SROI), CSR Index and similar concepts in the developing nations.
These techniques value the intangible work done by Social arms. The people impacted by the social activities become
loyalists of the companies and can be valued as either marketers, enablers for smooth operations or any term wherein
they contribute. If we look at Tata Jamshedpur Steel Plant, no other company can enjoy the trust, loyalty and goodwill
offered by the community towards Tata group, can we undermine these attributes and make
them valueless? Apart from Social and sustainable contribution the latest technique of Impact
Investments are an undisputed value creator for a companys performance, future and
sustainability. Non- Financial Reporting such as Global Reporting Indicators (GRI), Integrated
Reporting (IR), AA1000, and other varied forms of reporting/frameworks add credentials to the
company along with a means to learn the indicators which enable a company to run efficiently in
a sustainable and socially responsible manner.
Philanthropy Vs Responsible Business: We can cite the example of Patni who showed remarkable profits, assets in the
financial records but in reality got a blow due to unethical practices. Patni was proactive on Social welfare activities front
and won several awards for it but lacked on ethical practices thus making an unsustainable business proposition. On the
contrary, it is hard to cite an example of CSR and Sustainability compliant company with low financial records.
Challenges Faced due to discounting CSR and Sustainability in M&A:
The latest merger of Kotak Mahindra Bank and ING Vyasa has largely discounted CSR Factors
leading to announcement by the employees to go on strike from 7th January, 2015. There have
been concerns raised by the minority shareholders claiming the under-valuing of shares which
had to be sorted out in the Court. This is an ideal example to implement CSR while the M&A
process for smooth transitions. If the company envisions a sustained and responsible merger, it is
essential to imbibe CSR in the evolutionary stage itself.
Food for Thought:
In times to come, it would be inane to focus only on Balance sheets and P&L statements of a company while M&A when
non-financial reports enable a company to generate business in sustainable fashion in years to come .

It would be very expensive proposal to overlook CSR and Sustainability indicators during M&A - they have
become Inevitable!