Determinants of layoff announcements following M&As: an empirical investigation

It is often argued that mergers and acquisitions (M&As) lead to employee layoffs. This paper examines factors that influence the probability that a layoff announcement will follow an M&A. A sample of 136 large M&As, involving U.S. targets, that occurred between 1989 and 1993 is analyzed....

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Bibliographic Details
Published in:Strategic management journal 1998-10, Vol.19 (10), p.989-999
Main Authors: O'Shaughnessy, K. C., Flanagan, David J.
Format: Article
Language:English
Subjects:
Acquisitions & mergers
Applied sciences
Business management
Business structures
Case studies
Corporate mergers
Corporate strategies
Corporate synergy
Cost control
Debt
Debt management
Dismissals
Economic impact
Economic performance
Economics
Empirical research
Employees
Exact sciences and technology
Financial management
General aspects
Hypotheses
Investment strategies
Layoffs
Mergers
mergers and acquisitions
Organization theory
Organizational change
R&D
relatedness
Research & development
Research & development expenditures
Research Notes and Communications
Securities markets
Stockholders
Studies
Take-overs
U.S.A
Value creation
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Summary:It is often argued that mergers and acquisitions (M&As) lead to employee layoffs. This paper examines factors that influence the probability that a layoff announcement will follow an M&A. A sample of 136 large M&As, involving U.S. targets, that occurred between 1989 and 1993 is analyzed. Analyses of this sample indicate that the probability of a layoff announcement is higher if the firms involved in the transaction are related. The probability that a layoff will be announced was not changed when the acquirer was a non-U.S. firm (cross-border transactions). Target revenue per employee before the M&A is negatively related to the probability that a layoff was announced. Target financial performance prior to the transaction and use of borrowed funds to finance the merger were not found to have an impact on the probability that a layoff will be announced.
ISSN:0143-2095
1097-0266
DOI:10.1002/(SICI)1097-0266(199810)19:10<989::AID-SMJ994>3.0.CO;2-3