The effect of ESG-performance on M&A premiums : An Empirical Analysis of ESG in M&A’s

Abstract

We conduct a multiple regression on 1,498 M&A transactions from North America and Europe to study the relationship between ESG and M&A premium. Further on, we examine if it exists differences across industries and whether these differences can give us an economic intuition of the relationship. Our findings suggest that, overall, the premium reflects the ESG-performance of the target firm; however, we acquired somewhat ambiguous results when differentiating between industries. The industries are in different stages of the ESG evolution, which underscores the reasoning behind the ambiguous results. When increasing the target ESG-scores by one standard deviation, we were able to prove that there is an economic gain by focusing on improving ESG-scores to increase premiums.