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Acquiring Labor

Paige Parker Ouimet

University of North Carolina at Chapel Hill

Rebecca Zarutskie

Federal Reserve Board

October 1, 2011

US Census Bureau Center for Economic Studies Paper No. CES-WP-11-32

We present evidence that some firms pursue M&A activity with the objective of obtaining a larger workforce. Firms most likely to be acquired for their large labor force, firms with the largest ex ante employment, are associated with more positive post-merger employment outcomes. Moreover, we find this relation is strongest when acquiring labor outside of an M&A is likely to be most difficult, due to tight labor conditions, or most valuable, in high human capital industries. We further find that high employment target firms are associated with relatively greater post-merger wage increases and lower post-merger employee turnover. We find no evidence that the positive relation between target ex ante employment and ex post employment change is driven by target asset size, market capitalization, industry, profitability or acquirer characteristics. Our findings do not exclude the possibility that a different subset of M&A activity may be motivated to penalize managers who have tolerated over-employment. Indeed, we find evidence consistent with this disciplinary motivation when considering acquisitions of targets in declining industries.

Number of Pages in PDF File: 58

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Date posted: October 20, 2011 ; Last revised: September 20, 2012

Suggested Citation

Ouimet, Paige Parker and Zarutskie, Rebecca, Acquiring Labor (October 1, 2011). US Census Bureau Center for Economic Studies Paper No. CES-WP-11-32. Available at SSRN: http://ssrn.com/abstract=1946780 or http://dx.doi.org/10.2139/ssrn.1946780

Contact Information

Paige Parker Ouimet (Contact Author)
University of North Carolina at Chapel Hill ( email )
McColl Building
Chapel Hill, NC 27599-3490
United States
Rebecca Zarutskie
Federal Reserve Board ( email )
20th Street and C Streets NW
Mailstop 97
Washington, DC 20551
United States
202-452-5292 (Phone)
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