Companies scan diversity, inclusion before M&A deals

The rising importance of D&I is closely tied to the growing focus on ESG assessments

- Neha Joshi & Devina Sengupta

Driven by global standards and practices, companies engaged in mergers and acquisitions (M&As) are increasingly placing strong emphasis on diversity and inclusion (D&I) policies when evaluating potential deals, especially when it comes to cross-border deals.

"Today, deals are getting delayed if certain aspects are not in order. For example, questions about employment benefits, ESG (environment, social, governance) policies, and whether the company has a D&I policy are now standard," a senior partner of a law firm said, adding that people are even asking about policies like POSH (prevention of sexual harassment). "Just a few years ago, no one was asking these questions," the expert said, requesting anonymity.

Failure to meet diversity goals could raise red flags during due diligence, potentially hindering approval for cross-border transactions, according to Kunal Sharma, partner at Singhania & Co. "While the direct impact may be less pronounced, companies involved in cross-border M&A must align with international D&I standards to attract and retain foreign investments," Sharma said.

To be sure, India lacks specific legal mandates requiring diversity considerations in M&A transactions. But experts agree that it is becoming crucial in the decision-making process.