Acquisitions in the green transition era

Climate change is increasingly impacting people’s lives, disrupting national economies and transforming ecosystems. According to OECD figures, there is a need for significant infrastructure investment compatible with the goals of the Paris Agreement. In this context, corporate takeovers may foster this needed green transition, as they allow firms to acquire external technological resources (such as patent rights), to complement internal research and development (R&D) projects, or to accelerate the innovation process. However, due to factors such as information-related frictions, acquirer firms may potentially face challenges when identifying suitable target firms and valuing their resources, technology and synergy potential, particularly in deals which are outside their core areas of expertise. These challenges may effectively compromise the suitability of technological acquisitions as a way to foster the green transition.

Using a dataset of completed control acquisition deals over the period of 2009-2020 from 23 OECD countries, this research examines how green technology and sustainable innovation can influence the likelihood of acquisition between firms with different technological expertise, changes related to the introduction of the Paris Agreement, as well as post-acquisition innovation performance.

The paper finds that green acquirors (i.e., firms with green patents) are more inclined to enter into acquisition deals with green firms due to their technological proximity and informational advantages before and after the Paris Agreement. Second, after the Paris Agreement, green acquisitions by non-green acquirors increased especially from those in climate policy-relevant sectors and based in countries with low environmental standards. Third, after the Paris Agreement, green acquisitions do not show any significant impact on their post-acquisition innovation performances, raising concerns related to greenwashing behavior by investing firms.

Click here to go to the paper by Udichibarna Bose, Wildmer Daniel Gregori, and Maria Martinez Cillero.