Employment growth following takeovers

Abstract

We construct a comprehensive sample of takeovers in Belgium that shows they are remarkably common. Takeovers involve both small and large firms and, over a five‐year period, 17% of private sector employment. We estimate their impact on employment growth using a framework that explicitly takes into account that takeovers involve pairs of firms and that post‐merger outcomes are heterogeneous. The average merger temporarily reduces employment of the combined entity by −1.4%. Mergers likely to be motivated by market power show a stronger and permanent employment reduction of −14%, whereas those motivated by efficiency gains lead to employment expansions of +10%.

The Effect of Mergers and Acquisitions on Employees: Wealth Transfer, Gain‐Sharing or Pain‐Sharing?

“…Focusing on labour first, there is a sizeable volume of evidence that labour does badly after takeovers, suggesting that implicit contracts are broken by new owners. Studies in the UK, US, and Europe show that employment typically declines by 10-20% after takeovers (Lichtenberg and Siegel, 1990;Lehto and Bockerman, 2008;Amess et al, 2014;Dessaint et al, 2017;Geurts and Biesebroeck, 2017). Firms involved in M&A often adopt tougher labour management policies (Goergen et al, 2013) and such transactions often reduce their demand for labour (Conyon et al, 2001(Conyon et al, , 2002(Conyon et al, , 2004Gugler and Yurtoglu, 2004).…”

Firm Consolidation and Labor Market Outcomes

“…Our heterogeneity results thus far are consistent with firms taking part in labor restructuring post-consolidation to reduce labor inputs from over-placed workers and duplicative workers. The literature has proposed alternative mechanisms that may lead to takeover-induced job loss, such as increased product or labor market concentration (see e.g., Geurts and Van Biesebroeck, 2019;Arnold, 2021). We now rule out that these mechanisms are driving our results.…”

“…Our work contributes to the recent literature on the consequences of mergers and acquisitions for workers (Furlan, 2015;Geurts and Van Biesebroeck, 2019;Arnold, 2021;Todd and Heining, 2020;Prager and Schmitt, 2021). We make several contributions to this literature.…”

Activist Hedge Funds and Takeovers: Their Effects on Employment and Performance

“…Although there is an extensive literature in management, economics and finance on the effect of takeovers on employees (Amess, Girma and Wright, 2014; Dessaint, Golubov and Volpin, 2017; Geurts and Biesebroeck, 2017) and companies (King et al ., 2004; Renneboog and Vansteenkiste, 2019), there is very little on AHF involvement in takeovers, and its effects, even in the USA (as opposed to other governance interventions). Those studies focusing on AHF involvement have tended to examine the effects on targets rather than acquirers (e.g.…”