Are Acquirers Willing to Pay More for Strong ESG Performance?
Sammanfattning: We examine whether environmental, social and governance (ESG) performance impacts European companies' deal premiums in 171 control bids during the past 10 years (2010-2019). Our sample consists of bids where an acquirer is seeking a majority stake of a public target firm for a transaction value exceeding USD 100 million. We test if ESG factors impact bid premiums by conducting a regression on the premium offered and the target firm's Refinitiv ESG score (range 0-100). Our findings reveal that the highest ESG overall score is associated with a 25.4 percentage point higher bid premium. We analyze each dimension of ESG separately and find that all factors are significant and positively associated with the bid premium, even after controlling for year, country and industry effects. In addition, we examine the differences in willingness to pay between two acquirer types and find that financial buyers on average pay less for firms with strong ESG performance in comparison to strategic buyers. This leads to the finding that ESG characteristics matter more to strategic buyers.
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