Mergers of Equals and Unequals

35 Pages Posted: 26 Nov 2006  

Valerie Smeets

Universidad Carlos III de Madrid

Kathryn Ierulli

University of Chicago

Michael Gibbs

University of Chicago Booth School of Business; Institute for the Study of Labor (IZA)

Date Written: November 2006

Abstract

We examine the dynamics of post-merger organizational integration. Our basic question is whether there is evidence of conflict between employees from the two merging firms. Such conflict can arise for several reasons, including firm-specific human capital, corporate culture, power, or favoritism. We examine this issue using a sample of Danish mergers. Controlling for other effects, employees from the acquirer fare better than employees from the acquired firm, suggesting that they have greater power in the newly merged hierarchy. As a separate effect, the more that either firm dominates the other in terms of number of employees, the better do its employees fare compared to employees from the other firm. This suggests that majority/minority status is also important to assimilation of workers, much as in ethnic conflicts. Finally, greater overlap of pre-merger operations decreases turnover. This finding is inconsistent with the view that workers of the two firms substitute for each other, creating efficiencies from merger. However, that result and our other findings are consistent with the view that more similar workers (in terms of either firm- or industry-specific human capital) are easier to integrate post merger.

Keywords: mergers, internal organization, conflicts

JEL Classification: M5, G34, J63, M14

Suggested Citation

Smeets, Valerie and Ierulli, Kathryn and Gibbs, Michael, Mergers of Equals and Unequals (November 2006). IZA Discussion Paper No. 2426. Available at SSRN: https://ssrn.com/abstract=947081

Valerie Smeets

Universidad Carlos III de Madrid ( email )

E-28903 Getafe (Madrid)
Spain

Kathryn Ierulli

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Michael Gibbs (Contact Author)

University of Chicago Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

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