The Relationship between ESG Scores and Deal Premiums: An Empirical Analysis

This thesis explores the influence of environmental, social, and governance (ESG) scores on deal premiums in mergers and acquisitions (M&A) transactions, responding to an increased attention on sustainability and social practices in corporate finance. With a dataset of completed M&A deals from 2003 to 2023, this research investigates whether firms with higher ESG ratings, as well as strong performance in the individual ESG pillars—Environmental, Social, and Governance—attract higher premiums from acquirers. The study applies an empirical approach, using regression analysis to examine the relationship between target ESG performance and the premium paid in acquisition deals. By disaggregating the overall ESG score into its component pillars, this thesis also aims to identify which aspects of ESG performance, if any, are most valued by acquiring firms. This research contributes to the broader discussion on sustainable finance by analyzing the strategic role ESG can play in shaping M&A outcomes. Findings from this study may provide insights for corporate managers, investors, and policymakers interested in how ESG factors drive value in corporate transactions.