More and more companies merge, creating larger groups. In the process, there is a search for focus - with the consequent sale of companies active in areas not seen as essential. At the same time, new businesses, startups, are responsible for great amount of the innovation. Many startups attract resources from large groups, which funds their growth and enables the innovative process. The question at stake is whether mergers and acquisitions are positive to the economy.
see the article titled " Merger activity and unemployment in the USA " in the applied economic letters
From Croatian experience I can say that lots of M&As are followed by some kind of restructuring that ends with getting rid of "over-employment". On the other hand the question is would the companies have survived without merging or acquisition in the transition period that Croata went through from 90ies on.
This is very insightful comment Mirna. It will all come to the motives for merger and acquisitions. In many cases, merger and acquisitions are done to reduce costs, increase efficiency and effectiveness, or to acquire a falling but potentially good company. Additionally, the mergers and acquisitions in many countries that witnessed transitional stages from state-owned public firms to privatization were driven mainly by the reform purpose to restructure those firms, which indeed entailed getting rid of unneeded and unproductive employees.
M&A in any field implies acquisition of all assets and liabilities. With technology making inroads in all businesses it becomes imperative for organisations to focus on both- efficiency and effectiveness. No employee should ever take job for granted; in the current scenario the focus should be on learning new skills for enhancing employability. It is PERFORM or PERISH for all in government, private and other sectors.
Timira Shukla's answer, the first sentence, says it all.
Here is the logic: M&A activity aims to increase efficiencies and improve resource quality. Efficency means reduction of head counts; resource quality mean acquistion of the firm or part of it. In both cases, downsizing takes place. Head count reduction saves cost; acquired firm's managers and employers leave before acquistion or after it. They leave after the acquistion because of the missfit between teh two sides.
Therefore, the question should move beyond 'whether' or not...instead, it should be about contexts.
M&A in most cases results in the duplication of departments, with efficiency the key to the business success it is most certain that as the departments of the companies are somehow merged into one they wont be two staffs in every position as it was before the M&A.
M&A always, sooner or later, leads to unemployment. I have experienced it myself. The company that I worked for was acquired in an M&A by another company. At the time of the acquisition we were told that there would be no lay-offs(resulting in job losses). Within 3 months, we were told that there would be lay-off of more than 10,000 people. I continued to work for the acquiring company for another 18 months and refused the opportunity to have a more senior position, but in another country and therefore left. I then became an academic.
Several of my Master's degree students actually studied M&A for their theses research projects. Perhaps, I should convert their theses into research papers?
To end, no M&A exercise will remain, in terms of personnel numbers, the sum total of the two firms in the M&A exercise because costs will have to be reduced and there is no easier way to achieve that than to cut jobs -- and voila we have unemployment, while the acquiring CEO and his/her ilk laugh their way to the banks with big bonuses leaving many hardworking staff unemployed. Unemployment that follow an M&A, is a good indicator of the bankruptcy of ideas in these CEO's and their board of directors, I have to add.
Any other views out there? I would love to hear about that, and so would many others, I suspect. Perhaps, this(employment and loss of employment) could be a topic for some research, for anyone looking for topics to research.
I think about this that are wrong practice, cause this is a monopoly, and kill the competition
I strongly thank everyone's answers, in which I see so many interesting analyzes. Studying the topic for some time, I would like to share the elaboration of some study on some specific topic, if anyone is interested.
Dear Juan Vicente,
Sorry because I was very busy lately.
I have just one publication in English in M&A:
Article Cisões: Análise de um conjunto de situações à luz do Modelo ...
I think that it will be one step to begin some kind of alliance.
Anyway, I will receive your ideas and study your suggestions carefully
R. Minadeo
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