Acquiring Labor

Abstract

We present evidence that some firms pursue mergers with an objective of acquiring and retaining the target firm’s employees. Acquirers wishing to obtain employees via an acquisition will likely pursue firms with an important set of skilled employees who are difficult to obtain elsewhere and may possess unique skills. We identify such target firms by the language used to describe employees in their 10-K statements. Specifically, we focus on references to “skilled” employees. We find a positive correlation between the use of the word “skilled” and post-merger employment outcomes, suggesting employees of firms targeted as part of an acquiring labor motivation are more likely to be retained at the merged firm. Moreover, we find it is the target employees most valuable to the firm that are relatively more likely to be retained following an acquiring-labor-motivated acquisition, when we proxy for worker value with ex-ante wages. Acquirers appear to retain the high value employees in acquiring-labor-motivated acquisitions by providing these workers with relatively greater wage increases. These results are robust to controls for acquirer and target characteristics as well as industry trends in employment and wage changes.

Keywords: Mergers and acquisitions, wages, labor economics

JEL Classification: G30, G34, J30, J31