Global investors willing to pay for assets with better ESG footprint: Alvarez & Marsal’s Paul Aversano

Paul Aversano, managing director and global practice leader of Alvarez & Marsal’s global transaction advisory group (right) and Himanshu Bajaj, managing director and co-country leader, A&M India.
Paul Aversano, managing director and global practice leader of Alvarez & Marsal’s global transaction advisory group (right) and Himanshu Bajaj, managing director and co-country leader, A&M India.

Summary

  • Rising deal valuations in India are driving investors to focus on such innovative strategies, fuelling A&M's rapid expansion in the market where it offers a mix of restructuring, forensics, and deal-making services.

Global investors are increasingly prioritizing assets with a strong environmental, social and governance (ESG) footprint, driving up their value and putting ESG at the forefront of deal-making strategies in India, according to a top executive of global transaction advisory firm Alvarez & Marsal (A&M).

“If you're buying into a company with a better ESG footprint, the market’s going to put a greater premium on that when you go to exit... I have clients who in their post-transaction value creation blueprint require ESG as part of that," said Paul Aversano, managing director and global practice leader of A&M’s global transaction advisory group, told Mint in an interaction during his recent visit to India.

Aversano co-founded and leads the firm’s global transaction services group, US corporate M&A (mergers and acquisitions) transactions group and the US ESG business. “85-90% of the financial buyers said they were willing to pay more for a company that had an improved ESG footprint. Doing well financially as a business, is also not mutually exclusive to doing well in other areas," he added.

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Investors are increasing their focus on value creation before committing to an asset, particularly in markets like India where deals are happening at higher valuations. In addition to traditional strategies like management changes and bolt-on acquisitions to drive post-investment business growth, investors are increasingly prioritizing ESG and digital transformation in legacy businesses, added Aversano.

“It’s almost like because you’re coming in at such high multiples, what are the things that you can do to add value that historically you haven't done before?" said Aversano.

Rising deal valuations in India are driving investors to focus on such value creation through innovative strategies, fuelling A&M’s rapid expansion in the market where it offers a mix of restructuring, forensics and deal-making services.

Promoter-led restructuring

As non-performing assets (NPAs) and Insolvency and Bankruptcy Code (IBC) situations have declined over the past few years in India, investor-led restructuring at A&M has decreased, prompting a pivot toward promoter-led restructuring, Himanshu Bajaj, managing director and co-country leader, A&M India, told Mint. The firm sees growing traction as a significant opportunity for investment over the next 15 years, he added.

“In India, we continue to see that work, it doesn’t have to come only from the IBC situation, but there are enough stressed assets which need performance improvement services," he said. “We expect that this year, at least 20% of the work should be coming from there, higher than last year."

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Over the past year, India has witnessed a growing number of buyouts over minority stake investments. "In the business transformation segment, we have added 14 new managing directors this year itself, which is building capabilities by industry," Bajaj said.

The firm plans to increase its number of managing directors by three times, close to 60 by 2026. The focus areas for A&M are energy and resources, healthcare, consumer and retail, infrastructure, financial services and tech services.

“We are adding each of these as they are scaling up and expecting to be five times in terms of revenue in the next five years," added Bajaj.

India opportunity for A&M

For Aversano, the recent India visit has been focused on A&M’s hiring efforts. “I'm spending more of my time this week here meeting with candidates that potentially want to join us than I am even spending time with clients, which is the first time that's ever really happened."

For A&M, India continues to be a growing market with the firm planning to grow its team further. “It’s the kind of market that you can’t afford not to be in, particularly in a very large way. It’s a huge growth opportunity for our firm because we’re probably more of a newcomer relative to other professional services firms," said Aversano.

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He added that the efforts to expand rapidly in India is coming on the back of global investors growing interest to invest in India. “I was in Japan, and the investors there were talking very positively about wanting to invest in India. I’m travelling around the world, and I’m hearing in other countries their level of interest in India, which just solidifies our growth ambitions in the country," he said.

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