M&A under Distress: The Interplay of Financial Condition, Deal Characteristics, and Sustainability Factors

This thesis focuses on distressed Mergers and Acquisitions (M&A) transactions. Why? The topic of distressed companies nowadays is even more relevant than usual because many firms live in economic and financial uncertainty related to external macro events, such as post-Covid, conflicts, and environmental disasters. In this context, this thesis aims to investigate the logic of distressed M&A, an important tool to avoid bankruptcy and preserve the going-concern value of the firms, from a theoretical and empirical perspective. The thesis is structured in three main chapters, each with specific but closely related objectives: (1) the first one consists of a systematic literature review (SLR) on distressed M&A aimed at examining antecedents, decisions, outcomes, theories, contexts, and methods (ADO-TCM) found in papers where distressed companies are acquirers, where distressed companies are targets, and in both cases under a dual sell-side and buy-side perspective; (2-3) the second and the third one, which both rely on a quantitative methodology, respectively aims to examine the impact of corporate social responsibility (CSR) and the level of distress on deal premium, and the role of CSR in the likelihood of distressed companies to be targeted in M&A deals. The results of this thesis, particularly chapter one, revealed a considerable gap in the literature on distressed M&A regarding the issue of social, environmental, and governance (ESG) performance. This gap has been partially filled by chapters two and three, confirming that these aspects, in various forms, significantly impact these transactions. However, talking about ESG as a unique score does not make sense, but breaking down the analyses into its pillars is more appropriate. In doing so, we have obtained interesting results concerning the relationship between environmental and social performance on the deal premiums, also considering the moderating effect of the level of the target's distress, and the governance performance in the likelihood of becoming a target in a distressed M&A transaction. Those results fill gaps in literature and are useful operational indicators for practitioners and policymakers