Stay close to me: What do ESG scores tell about the deal timing in M&A transactions?

We examine how sustainability divergences between acquirer and target firms affect the deal timing in M&A transactions. Using a unique sample of 415 M&A deals from 2002 to 2020, we show that higher discrepancies between acquirers and targets in their pre-deal sustainability performance lead to an increase in the deal timing. Then, we explore which constituent pillar of the ESG ratings drives our main findings, and we find that differences in how both firms deal with governance and social issues increase the deal timing. Our results are robust to alternative specifications and the inclusion of country macro and socioeconomic features.