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

•We study the nexus between differences in pre-deal sustainability performance between target and acquirer firms and deal closure timing in M&A transactions.•We analyze a sample of 415 M&A deals in the European Union and United Kingdom from 2002 to 2020.•We find that discrepancies in the pre-deal ESG ratings between target and acquirer firms lead to an increase (or a decrease) in the deal timing (or speed of closure).•Our results show that differences in how firms deal with governance (G) and workforce (S) issues prolong the time required to close the M&A deal.•Our results are robust to alternative specifications and the inclusion of country macro and socioeconomic features. 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.