Should Employment Authorities Worry About Mergers and Acquisitions ?

Margolis, David

Should Employment Authorities Worry About Mergers and Acquisitions ?

No 2006-03, Working Papers from Center for Research in Economics and Statistics

Abstract: This paper considers the role mergers and acquisitions have on employment. First, itconsiders the importance of different aspects of compensation policy and humanresource management practices for distinguishing acquired and acquiring firms.Second, it examines which individuals from which firms remain with the newlycreated entity after the takeover. Using a unique employer-employee linked data setfor France, we find that very few observable workforce or compensationcharacteristics distinguish acquired from acquiring firms ex-ante. Nevertheless, thehuman resources department seems to be quite active in the post-takeover period, withemployees of the acquired firm being less likely to remain with the new entity in theshort term after takeover than those of the acquiring firm and with the differencesbetween the two types of firms disappearing after 3 years. The workers withcharacteristics that tend to be associated with the fastest subsequent job finding in thedisplaced worker literature are also those who tend to be overrepresented among theindividuals who separate from their employer post-takeover. Finally, as both acquiredand acquiring firms differ from firms not involved in takeover activity in a similarmanner, employment authorities may be able to anticipate the regions in whichtakeovers are more likely to occur by looking at the financial accounts of firms withparticular characteristics that have local establishments.

Pages: 43
Date: 2006
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